
Glass _SjELa^ 

Book "J^Jo— 

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CORfRlGHT DEPOSm 



^^e Citi^nt's; ilibrar? 

MARKETING SERIES 
Edited by RICHARD T. ELY, Ph.D., LL.D. 

PROFESSOR OF ECONOMICS IN THE UNIVERSITY OF 
WISCONSIN 



THE MARKETING OF WHOLE MILK 



THE CITIZEN'S LIBRARY OF ECONOMICS, 
POLITICS AND SOCIOLOGY 
Edited by 
RICHARD T. ELY, Ph.D., LL.D. 

PROFESSOR OF ECONOMICS IN THE UNIVERSITY OF 
WISCONSIN 

NEW SERIES 

The Progressive Movement. By Benjamin P. DeWitt, 

M.A., LL.B. 
The Social Problem. By Charles A. Ellwood, Ph.D. 
The Wealth and Income of the People of the United 

States. By Willford I. King, Ph.D. 
The Foundations of National Prosperity. By Richard 

T. Ely, Ph.D., LL.D.; Ralph H. Hess, Ph.D.; Charles 

K. Leith, Ph.D.; Thomas Nixon Carver, Ph.D., LL.D. 
The World War and Leadership in a Democracy. By 

Richard T. Ely, Ph.D., LL.D. 
Budget Making in a Democracy. By Major Edward A. 

Fitzpatrick. 
The Vision for which We Fought. By A. M. Simons, 

B.L. 
City Manager in Dayton. By Chester E. Rightor, B.A. 
Popular Government. By Arnold B. Hall, B.A., J.D. 
The Non-Partisan League. By Andrew A. Bruce, LL.B. 
The Marketing of Whole Milk. By Henry E. Erdman, 

Ph.D. 



t!P|)r Citijen'g Jlibran? 



THE 



MARKETING OF WHOLE 

MILK 



HENRY E\ ERDMAN Ph.D. 

11 

ASSISTANT PROFESSOR OF RURAL ECONOMICS, OHIO 
STATE UNIVERSITY 



5?M» fork 

THE MACMILLAN COMPANY 

1921 

All rights reterved 






COFYRIGBI, 192 1 

Bv THE MACMILLAN COMPANY 



Set up and electrotyped. Published June, iqsi. 



Printed in the United States of America 



JUL 13'? 



©aA614984 



AUTHOR'S PREFACE 

Milk is a food in the distribution of which the public 
has taken particular interest, and on which much has been 
said and written. Numerous investigations have been 
made and reports issued upon the subject. The author 
has made a careful study of all such material available, in 
order to supplement information gained from a number of 
years of personal contact with the milk business in various 
parts of the country, and has attempted here to present a 
rounded out discussion of some of the economic phases of 
milk distribution and of the ever present problem of price 
determination. It is hoped that such a presentation may 
aid in clearing the air of much that is beside the point or 
even in error and may give a clearer conception of the 
whole problem to those who are called upon to solve it. 

Acknowledgment should be made for the assistance 
rendered by a large number of milk dealers, by officers of 
milk producers' associations, by public officials, and by 
some of my fellow teachers. Special acknowledgment is 
due to Professor B. H. Hibbard, of the University of 
Wisconsin, and to Professor J. I. Falconer, of Ohio State 
University, who very carefully read the manuscript and 
gave helpful suggestions. 

H. E. Erdman. 
Columbus, Ohio, 

April 29, 1 92 1. 



CONTENTS 

Chapter Page 

I. Introductory Sketch i 

Milk problem the result of complex nature of modern civiliza- 
tion, i; decline of the milk peddler, 2; widening of the gap 
between producer and consumer, 2-3. 

II. Milk as a Market Commodity: 

Section i. Some Comparisons 4 

Volume of milk produced in the United States, 4; its food 
value, 4; how utilized in 191 8, 5; where fluid milk was con- 
sumed, 6. 

Section 2. Peculiar Place of Milk in Our List of Wants 6 

Milk Consumption in various sections of the United States, 
8; advertising milk, 9; consumption of condensed and pow- 
dered milks, 10. 

Sections. Regularity of Production and Consumption 10 

Milk more regularly produced and consumed than many other 
commodities, 10; age of milk, 11; milk contrasted with other 
products, 12. 

Section 4. Milk Distribution Afectedwith a Public Interest 13 

Milk as a market commodity has long been hampered by regu- 
lations, 13; when is a business "affected with a public inter- 
est? 12-14; transmission of disease germs through milk, 14; 
milk compared with bread and other foods, 15. 
Section 5. Health Regulations Affecting the Marketing of Whole 

Milk 16 

Such regulation now seldom contested in the courts, 16; early 
instances of regulation, 16; earliest dairy inspection in the 
United States, 17; attitude of dairymen toward regulation, 
18; dairymen recognizing economic worth of regulation, 19; 
dairyman more important than dairy, 20; comparison of 
score card scores and bacterial counts, 21; value of bacterial 
count, 22J pasteurization adds element of safety, 22; accep- 
vii 



viii CONTENTS 

Chapter Page 

tance of pasteurization, 23 ; extent of practice of pasteuriza- 
tion, 23;! four methods of regulating city milki supplies, 24^ 
who should regulate, 26; city regulation, 26; state regula- 
tion, 27; federal regulation, 28; extent of milk regulation 
in Wisconsin, 28-29; in United States, 30; influence on 
death rate, 31. 

Section 6. Standards and Grades 32 

Legal standards necessary, 32; government standards usually 
minimum standards, 32; milk standards, 33; standards of 
various states, 34; composition of milk, 34; city vs. state 
standards, 35; different grades, justification for, 35; market 
classes, 36; certified milk, 36; medical milk commissions of 
Milwaukee, Chicago, and Minneapolis, 37-38; New York 
grades, 38; recommendations of Committee on Milk Stand- 
ards, 39; standardization of fat content, 41; grading of milk 
feasible, 41. 

Section 7. Basis of Payment for Milk 42 

Comparison of prices difficult, 42; different bases of payment, 
42; Babcock test, 43. 

III. The Markets for Whole Milk: 

Section i. The City as a Market 45 

Proportion of milk entering directly into milk problem, 45; 
a "sellers' market," 46; amount of milk available for a city 
like Milwaukee, 46; Milwaukee, Chicago, and other milk 
zones, 48; New York milk zone, 50; expansion of a milk zone, 
50; Dairymen's League membership, 51; producer may 
claim a vested interest in a city's markets, 53. 

Section 2. Alternative Markets 53 

What are they? 53; a typical instance, 54; the condensery as 
an alternative market, 56; the creamery and cheese factory 
as alternative markets, 57; the ice-cream factory as an 
alternative market, 58. 

Section 5. The Ex-port Markets for Milk 59 

Exports confined almost entirely to the various powdered, 
condensed, and evaporated milks, 59; pre-war export mar- 
kets, 59; milk exports by years, 60; milk export by coun- 
tries, 61. 



CONTENTS ix 

Chapter Page 

IV. Distribution of Milk: 

Section I. Collection of Milk from the Farmers 62 

The direct and indirect methods, 62; collection by wagons and 
trucks, 62-63; milk collection by electric railway lines, 63; 
collection at country plants, 64; limitations of the country 
plant, 66; ownership of country plant by producers, 67; 
country creameries, cheese factories, and condenseries as 
collectors of milk, 67. 

Section 2. Railway Transportation of Milk 68 

Development of railway transportation, 68; leased cars, 69; 
milk freight zones, 69. 

Section 5. The Middleman Function 7° 

Middleman generally denounced, 70; his functions, 71 ; direct 
and indirect methods of distribution, 71; sale of milk 
through stores, 72; duplication of services, 72, 

Section 4. Direct Marketing 73 

Prevalent about our small cities, 73; various methods, 73; 
moderate amount of equipment needed, 74; method of han- 
dling simple, 74; surplus and shortage not serious problem, 
74; disadvantages of direct marketing, 75; special milk, 76; 
direct distribution not a solution of the milk problem, 76; 
opportunities of direct marketing, 77. 

Section 5. Indirect Marketing 77 

Prevails in our cities, 77; financial relations between dealers 
and farmers, 78; financial standing of dealer, 79; dealers' own 
milk cans, 79; entrance of the middleman, 80; high degree 
of systematization necessary in a big milk business, 81; proc- 
esses in large plants, 82; tendency towards centralization, 
84; can small dealer withstand competition? 84; why the 
small dealer stays, 85-87. 

Section 6. The Delivery Problem 87 

Horse and wagon delivery most usual, 87; use of motor trucks, 
88; daylight vs. night delivery, 89; size of load, 90; pay of 
drivers, 91; collection of accounts, 91; the ticket system, 91; 
duplication in delivery service, 92; relation between number 
of dealers and amount of duplication, 94. 



X CONTENTS 

Chapter Page 

Section 7. The Store as a Factor in Milk Distribution 95 

Channels through which milk reaches the consumer, 95; claims 
regarding the store as a distributor of milk, 95; economy not 
the only thing to be considered, 96; emergency needs for 
milk, 96; providing refrigeration, 96; store cannot advan- 
tageously be eliminated from milk distribution^ 97; can 
store take over entire distribution? 97; daily distribution 
necessary in case of milk, 97; cash-and-carry system, 98; 
store cannot take over entire distribution of milk, 98; store 
margins on milk, 99; price policy for stores, loi; milk sales 
different from other sales, loi. 

Section 8. The Surplus Plan 102 

Nature of surplus, 104-7; milk for city use produced relatively 
near city, 106; plans for meeting surplus problem, 107; co- 
operative plants for handling surplus, 107-9; Philadelphia 
surplus plan, 109; New England plan, no; Akron, Ohio, 
plan. III; plan proposed for New York City, 112. 

Section g. Cost of Distribution 117 

Source of discussion regarding costs, 117; "costs" and 
"spread," 118; variation in dealers* margins, 121; varia- 
tions in costs, 122; relation of costs of handling to specific 
costs, 123; relation of costs per quart to investments, 124; 
relation of costs to size of business, 125; costs and relative 
efficiency of dealers, 125; table of costs, 126-7; costs in eighty 
Massachusetts plants, 126; costs in Detroit plants, 127-8; 
cost of labor in Rochester plants, 128; true cost difficult of 
ascertainment, 129. 

Section 10. Development of the Present System of Distribution 129 

Present system the result of development, 129; still much 
inefficiency, 129; tendency toward centralization, 130; esti- 
mated savings of a centralized system, 13 1-2. 

V. Collective Bargaining in the Sale of Whole Milk: 

Section i. Development of Collective Bargaining 134 

Idea of collective bargaining arose with rise of factory system, 
134; status under English common law, 134; development 
in England, 135; development in the United States, 135; col- 



CONTENTS xi 

Chapter Page 

lective bargaining in agriculture, 135; granger movement, 
136; need for collective bargaining in the dairy business, 137. 

Section 2. Historical Sketch of Collective Bargaining in the Sale of 

Milk 138 

Organization among dairymen has existed for about forty 
years, 138; some early organizations in New York, 139; 
organization in New England, 144; organization about 
Philadelphia, 147; organization about Baltimore; organiza- 
tion in northern Ohio and eastern Pennsylvania, 150; organ- 
ization about Chicago, 152; historical list of organizations, 
154- 

Section 5. Collective Bargaining in the Milk Business, igiQ-iQ20 . 155 
Dates of formation of recent organizations, 156; types of or- 
ganization, 156; surplus problems, 158; cooperative retail 
distribution, 159; the "strike" or boycott, 160; contracting 
practices, 161; liquidated damage clause, 162; revenue, 162; 
commissions charged for selling milk, 164; formation of 
National Milk Producers' Federation, 164. 

Section 4. Discussion of Specific Organizations 165 

The New England Milk Producers' Association, 165; extent 
of operations, plan of financing, 166; Dairymen's Coopera- 
tive Sales Company, 168-70; The Dairymen's League, 171- 
72; The Dairymen's League Cooperative Association, 174- 
75; plan of financing, 175; The Chicago Milk Producers' 
Association, 175; The Associated Milk Producers, Inc., 178; 
Northern California Milk Producers' Association, 178, Asso- 
ciated Dairymen of California, 180; leading producers' asso- 
ciations, 182. 

Section 3. Cooperative Distribution of Milk 183 

Newness of the movement, 183; Erie County Milk Associa- 
tion, 185; results of cooperative distribution in three cities, 
186. 

VL Milk Prices: 

Section 1. Price Relationships 188 

Price a matter of complex relationships, 188; demand and 
price, 188; price and supply, 190; cost and price, 191; deter- 
mination of price, 192; marginal producer, 192. 



xii CONTENTS 

Chapter Page 

Section 2. Determination of Wholesale Milk Prices 194 

Competing use demands focus on receiving points, 194; no 
simple price-determining mechanism, 195; a call market 
suggested, 195; influence of the large dealer on prices, 197; 
bargaining power of dealer and producer, 197-99; cost of 
production, 199; the formula method, 200; quotations on 
other products as bases for milk prices, 206; butter, cheese, 
milk, and other prices compared; 209-10; prices in several 
cities, 212-219; influence of producers' associations on 
prices, 219; a weakness of producers' organizations, 222; 
sectional variations in milk prices, 224; returns from milk 
and other products, 224. 

Section j. Determination of City Milk Prices 226 

City milk prices complex, 226; four classes of prices, 228; 
separate forces determine prices in each class of trade, 228; 
store prices, 228; prices not based exactly on cost of service, 
230; influence of producers' organizations on city prices, 236. 

VII. Consideration of Proposed Remedies : 

Section i. Classification of Remedies 242 

Many suggestions offered, 242; list of principal proposals, 242. 

Section 2. Municipalization of Milk Distribution 243 

Milk distribution as a public function, 244; milk and water 
compared, 244; how about other necessaries ? 246; financing 
municipal enterprises, 246; control, 247; municipal distri- 
bution, if undertaken, should be on a self-sustaining basis, 
248; advantages and disadvantages, 248; feasibility of 
municipal distribution, 251. 

Sections- Publicly Regulated Private Monopoly 251 

Legalized monopoly, 252; plan proposed for New York City, 
252; the Calgary, Canada, plan, 255; public fear of monop- 
oly, 256. 

Section 4. Cooperation as a Remedy 257 

Four types of cooperation proposed, 257; cooperation among 
dealers, 257; cooperation between producers and grocers, 
258; cooperation among consumers, 258; cooperation among 
producers, 259. 



CONTENTS xiii 

Chapter Page 

Section 5. The Milk Commission and Milk Arbitrator Plans 259 

The milk commission plan, 259; state commission proposed for 
New York, 261; the milk price arbitrator, 261. 

Section 6. The Store or Milk Station as a Solution 262 

Section 7. Zoning of City to Eliminate Duplication 262 

Zoning frequently suggested, 263 ; difficulties of zoning, 263 ; 
savings probably not great, 263. 

Section 8. Collective Bargaining as a Remedy 264 

Not a remedy for all evils, 264; a practical solution for many 
phases of milk problem, 264. 

VIII. Conclusion: 

Public interest in the milk business, 266; greater concentra- 
tion desirable, 266; possibilities for improvement, 266; sur- 
plus problem, 267; no easy solution for price problem, 268; 
collective bargaining, 268. 

Appendix A. Regulation 13 from New York Sanitary Code 271 

Appendix B. Some Problems Arising out of the Marketing of Milk 

on a Butterfat Basis 277 

Appendix C. Contract of Dairymen s Cooperative Sales Company . 285 

Appendix D. Prices of Milk and Other Commodities 287 

Bibliography 317 

Index of Subjects 323 



LIST OF FIGURES AND CHARTS 

Fig. Page 

1. Diagram Showing the Bacterial Counts of the Lexington 

Milk Supply for June, 1917 24 

2. The Detroit Milk Zone 47 

3. The Milwaukee Milk Zone 49 

4. Some of the Many Ways Milk is Used 55 

5. A Condensery and its Patrons 58 

6. Wholesale Milk Routes Supplying Milwaukee, 1916 58 

7. Fluctuations in Supply and Demand of a Milwaukee 

Dealer 102 

8. Supply and Demand in the New York Market 103 

9. Monthly Variation in Price of Milk and in Cost of Pro- 

duction 105 

10. The Supply and Demand for Milk in Boston, Philadelphia 

and Cleveland 108 

11. How Columbus Milk Reaches the Consumer 119 

12. Location of 26 Farmers' Milk Distributing Companies in 

1920 184 

13. Effect of Price per Quart and per Pint on the Proportions 

of Each Taken 189 

14. Relative Average Monthly Milk and Butter Prices, New 

York City 211 

15. Relative Average Prices Paid to Milk Producers in Ten 

Cities, and Relative Prices of "All Commodities." .... 213 

16. Milk Prices Paid Producers in Three Cities (Pittsburg, 

Chicago, and New Orleans), compared with Average of 
Ten Cities 214 

17. Milk Prices Paid to Producers at Philadelphia and New 

York Compared with Average of Ten Cities 215 

18. Milk Prices Paid to Producers Near Cleveland and Toledo, 

Ohio, Compared with Average in Ten Cities 217 

19. Milk Prices Paid to Producers at Springfield and Columbus, 

Ohio, Compared with Average of Prices in Ten Cities. 218 

XV 



xvi LIST OF FIGURES AND CHARTS 

FlG. ■ irlGE 

20. Milk Prices Paid to Producers at San Francisco and at 

Portland, Oregon, Compared with Average of Prices in 
Ten Cities 220 

21. Relative Average Wholesale and Retail Milk Prices in Ten 

Cities 227 

22. Relative Wholesale and Retail Milk Prices, Milwaukee .... 231 

23. Relative Wholesale and Retail Milk Prices, Pittsburg 232 

24. Relative Wholesale and Retail Milk Prices, New York 

City 233 

25. Relative Wholesale and Retail Milk Prices, Philadelphia. . . 234 

26. Milk Prices Paid by Consumers in Pittsburg, Chiacgo and 

New Orleans, Compared with Average in Ten Cities. ... 235 

27. Milk Prices Paid by Consumers in Philadelphia and New 

York Compared with Average in Ten Cities 237 

28. Milk Prices Paid by Consumers in Cleveland and San Fran- 

cisco Compared with Average in Ten Cities 238 

29. Relative Retail Prices of Milk, Round Steak, and Twenty- 

two Foods Combined (Averages for the U. S.) 239 



THE MARKETING OF WHOLE MILK 



THE MARKETING OF 
WHOLE MILK 

CHAPTER I 

INTRODUCTORY SKETCH 

The milk problem has arisen largely as a result of the 
complex nature of our modern civilization. In less ad- 
vanced countries there is practically no such question, 
because, in the first place, backward peoples use less 
milk than enlightened peoples, and in the second place 
each family group is to a much larger extent self-sufficing. 

Milk distribution does not become a real problem until 
producer and consumer are somewhat widely separated. 
In the early history of all of our large cities many of the in- 
habitants "kept a cow," a practice followed to this day in 
many sections, especially in the smaller cities and towns. 
Other consumers procured their milk supply from a neigh- 
bor who had a cow, and still others patronized the milkman 
— a producer who drove into the city from his farm morn- 
ing and evening with his cans of milk, frequently announc- 
ing his presence by means of a bell or whistle.^ Upon his 
arrival the housewife went to his wagon with some conven- 
ient vessel to get her milk. Sometimes the milkman fol- 
lowed a more or less regular route, stopping here and there 

^ Harbison, Thos. B., Milk and lis Distribution in Philadelphia (1917), 
p. I. 

I 



2 THE MARKETING OF WHOLE MILK 

at the homes of persons considered as customers, often car- 
rying into the house a small pail of milk with a spout for 
pouring. 1 

As cities grew, more and more of the dairymen found 
that it took too long to peddle milk in the city in addition 
to making the long drive to and from town. Gradually, 
therefore, the practice became common for some man in 
the city to buy milk of the producer and deliver it to the 
consumer, and thus leave the farmer free for his farm work. 
Also various shopkeepers were found who agreed to handle 
milk and sell it at a slight gain to such persons as needed 
an extra supply or as had missed the milkman. 

Until about 1842 all New York milk was hauled into the 
city by wagon. In 1842 the first rail shipments of milk 
were made into New York City from Chester, Orange 
County, New York, and during the summer of that year 
about 45 cans were shipped daily. During the next year 
the daily average reached 275 cans.^ In October, 191 7, 
New York received milk from 30,934 farms located in six 
states and Canada.^ Philadelphia obtains milk from as far 
as points near Rochester and Buffalo, New York.^ Pitts- 
burg, Cleveland, and Chicago all get milk from widely 
scattered territory. In each case producers and consumers 
are brought together by means of middlemen after a delay 
of many hours. This wide separation of producer and con- 
sumer, as related to several other factors, gives rise to 
difficult problems. Chief among these factors are the fol- 
lowing conditions: 

1 The writer found numerous instances of this practice in small towns of 
Wisconsin in the summer of 1916. 

2 Van Wagenen, J., Jr., Country Gentleman, June i, 1912, p. 7. 

3 Report of the Mayor's Committee on Milk, Dec, 1917, p. 16. 

* Harbison, Thos. B., Milk and Its Distribution in Philadelphia, p. i, 
1917. 



INTRODUCTORY SKETCH 3 

1. Milk occupies an unique and important place in our 
diet. 

2. Milk is an extremely perishable product. 

3. The nature of the product and the conditions of its 
production and distribution are such that supply and 
demand arc not easily or quickly adjustable. 



CHAPTER II 

MILK AS A MARKET COMMODITY 

Section i. Some Comparisons 

The United States Bureau of Markets has made the es- 
timate that a total of 87,905,512,800 pounds of milk was 
produced in the United States in 191 8. Of this, it further 
estimated, 44.25 per cent was consumed as fluid milk.'^ 
Figuring the food value of milk at 307 calories per pound 
and the food value of potatoes at 303.4 calories per pound 
(figures used in Illinois Experiment Station Circular 235, 
pp. 5 and 18), the food value of the fluid milk consumed in 
191 8 was 60 per cent greater than that of the entire potato 
crop of the same year.^ On a basis of money value, figur- 
ing the value of milk at $2.80 per hundred ^ and taking the 
average price of wheat and potatoes as given by the De- 
partment of Agriculture for December i, 191 8, we have the 
following comparison of values: 

Fluid milk consumed 1918 ^1,089,200,000 

Potato crop of 1918 478,136,000 

Wheat crop of 1918 1,874,623,000 

How the total of over eighty-seven billion pounds of milk 
was utilized has been estimated by the Bureau of Markets 
as follows: ^ 

^ Hoard's Dairyman, May 23, 1919, p. 916. 

2 See Year Book, Department of Agriculture, 1918. 

' Hoard's Dairyman, May 23, 1919. 

* Hoard's Dairyman, May 23, 1919. 

4 



MILK AS A MARKET COMMODITY 5 

Table I 

Tentative Statement by U. S. Bureau of Markets for Year 1918 of Amount and 
Percentage of Milk Used in the Primary Manufacture of Dairy Products 
and for Other Purposes, Based Upon the Most Reliable Sources of Infor- 
mation Available 

Number of milk cows on farms, January i, 1918 23,310,000 

Number of milk cows in towns and cities, January i, 1918 1,500,000 

Total number of milk cows 24,810,000 

Average number of dairy cows not producing milk during the year. . . 2,481,000 



Net number of cows producing milk on farms and in towns and cities 22,329,000 



Item 



Pounds of milk 



Percentage 
of total 



Production of 22,329,000 dairy cows at 3,936.8 
lbs. per cow 



Disposition of product: 

800,000,000 pounds creamery butter (at 21 lbs. 

milk) 

710,000,000 pounds dairy butter (at 21 lbs. milk) 

400,000,000 pounds cheese (at 10 lbs. milk) 

1,600,000,000 pounds condensed milk (at 2}4 lbs. 

milk) 

220,000,000 gallons ice cream (weighing 6 lbs. to 

the gal. 10% fat) 

5,000,000 pounds powdered milk (at 8 lbs. milk). . 
16,000,000 pounds malted milk (at j4 lb. milk) . . 

6,000,000 pounds sterilized milk (canned) 

105,000,000 persons; 45% at 0.7 pound a day 

(cities); farms with dairy cows, 30%, 1.5 lbs. 

per day; other farms and small towns, 25%, 

I lb. a day, approximately 

17,848,000 dairy calves (estimated) requirement 

of whole milk 

Losses on farms and factories — about 2%% .... 



87.905,5 1 2>8oo 



16,800,000,000 

14,910,000,000 

4,000,000,000 

4,000,000,000 

3,300,000,000 

40,000,000 

4,000,000 

6,000,000 



38,899,875,000 

3,748,000,000 
2,197,637,800 



19.10 

16.91 

4-45 

4 -45 

3-75 
.04 
.004 
.006 



44-25 

4.26 

2.50 



Total 87,905,512,800 



This statement is expressed in round numbers, and the figures in most in- 
stances are estimates. 



6 THE MARKETING OF WHOLE MILK 

Elaborating on the above table as it applies to the 
38,899,875,000 pounds consumed as fluid milk, we have 
the following: 

Table II 



Where consumed 


No. of 
persons 


%of 
total 
popu- 
lation 


Estimated 
consump- 
tion per 
capita daily 


Pounds 

consumed 
daily 


% of total 
daily fluid 
consumption 


On farms with dairy cows . . 
In small towns and on 
farms with no dairy cows . 
In cities 


31,500,000 

26,250,000 
47,250,000 


30 

25 

45 

100 


1.5 lbs. 

I.olb. 
.7 lb. 


47,250,000 

26,250,000 
33,075,000 


44-34 

24.63 
31 03 






105,000,000 


100.00 



On the basis of this estimate 44.34 per cent of the fluid 
milk is consumed on the farms producing it and does not 
enter into commerce at all. In small towns and on farms 
having no dairy cows, 24.63 per cent is consumed; in which 
instance there is no marketing problem, for the milk is ob- 
tained either from a neighbor or from some producing 
milkman who makes daily personal visits directly to the 
consumer. It is, then, only the 31.03 per cent consumed 
in our cities which is the object of so much contention; and 
this 31.03 per cent of the milk consumed in fluid form con- 
stitutes only 13.73 per cent of the total production of 
87,905,512,000 pounds. 



Section 2. Peculiar Place of Milk in Our List of Wants 

One of the principal reasons why the milk question has 
been so prominently before the public is the fact that milk 
occupies a peculiar place in our list of wants. Its 



MILK AS A MARKET COMMODITY 7 

composition is such that it is the ideal food for the 
young. It has been estimated that two-thirds of the 
American children under one year of age are compelled 
to live on milk.^ Whether the number is actually as large 
as this or not is immaterial. It is undoubtedly very great, 
great enough to mean that milk is an absolute necessity 
in at least several million homes. Even children who 
are breast-fed and older children use considerable milk, 
and a great many adults use it regularly as a beverage. 
As one of the chief ingredients needed in cooking it is 
indispensable. 

The importance of milk in the diet has been thus stated 
by the Committee on Nutritional Problems of the Food 
and Drug Section, American Public Health Association, 
in its report of October 14, 1918: "A liberal use of milk 
in the diet is the best safeguard against any deficiency 
which might possibly arise through restricted choice of 
foods. "2 The necessity for milk in the diet of growing 
children has been emphasized by the studies and experi- 
ments of Dr. E. V. McCullom concerning the influence 
of milk and the butterfat which it contains on the growth 
of young animals.^ 

Just how much milk is consumed in a given locality 
either as a drink or for culinary purposes is hard to de- 
termine. In 1 91 6 the writer made rather careful estimates 
as to the consumption in several Wisconsin cities and 
towns. The results are shown in Table III.^ 

1 Washburn, Prof. R. M., Milk Magazine, Sept., 1919, p. 19. 

* Mumford, H. W., and Wilcox, Roy H., Jour, of Farm Economics, Oct., 
1919, p. 117. 

^Hoard's Dairyman, Dec. 19, 1919, p. 1033. 

* Wis. Agr. Exp. Sta. Bui. 285, p. 5. 



THE MARKETING OF WHOLE MILK 



Table III 
Per Capita Consumption of Whole Milk 



City 


Estimated population 

July I, IQ16 

(By U. S. Census) 


Total estimated 
daily consump- 
tion — pints 


Pints consumed 
daily per capita 


Milwaukee 


436,53s 
36,065 

29,353 

18,807 

18,072 

680 

480 


265,319 

16,060 

12,649 

9,354 

11,550 

380 

266 


608 


Oshkosh 


•445 
•431 
■497 
•639 
•S59 
•554 


Green Bay 


Eau Claire 


Beloit 


Monticello ■* 


Belleville i 





In 1 914 the Dairy Division of the United States De- 
partment of Agriculture made a survey in which it at- 
tempted to ascertain the daily per capita consumption 
of milk in various parts of the country.^ The results 
of this survey appear in the following table: 

Table IV 

Milk Consumption and Milk Prices by Geographic Divisions 





Daily consumption 


Average price 


Geographic division 


No. of cities 
reporting 


Pints per 
capita 


Cities 
reporting 


Price per 
qt. — cents 


New England 


59 
64 
27 
73 
29 
9 
33 
16 

9 
319 


•7252 
•7193 
•7152 
.6961 

•5632 
.5088 
• 4256 
•3952 
.3080 


76 
92 

37 
104 

37 
IS 
44 
22 

15 

442 


8.50 
7.78 
8.23 
8.07 

9-39 
8.76 


East North Central 

West North Central 

Middle Atlantic 


Pacific 


Mountain 


South Atlantic 


10.20 


West South Central 

East South Central 


9-93 
0.61 






Average or total 


.6504 


8.59 





^ Population estimated by the writer. 

2 Address of L. B. Cook, of Dairy Division before International Association 
of Dairy & Milk Inspectors, 1916, reprinted in Annual Report, pp. 281-283. 



MILK AS A MARKET COMMODITY 9 

It is interesting to note that the per capita consump- 
tion in general is largest in the northern and eastern parts 
of the country, where dairying is well developed, and low- 
est in the south and west, where dairying is more or less 
backward and where prices are highest. 

The coming of prohibition is leading to a wider use of 
milk as a beverage among working men in our industial 
centers, and this use will undoubtedly become more gen- 
eral as milk is made more readily available at all times. 
Many milk distributors at present provide for the delivery 
of milk to workmen in pint or half pint bottles at the noon 
hour. 

Demand for milk can undoubtedly be greatly increased 
by judicious publicity and advertising. Most of the adver- 
tising hitherto has been done by rival distributors whose 
arguments have sought to show that the milk of each par- 
ticular dealer was pure and uncontaminated and that 
mothers might give that specific milk to their children 
without fear of conveying deadly disease. Such adver- 
vertising undoubtedly sold the product of one dealer at 
the expense of the others, but at the same time it raised 
doubt in the minds of consumers as to the sanitary quality 
of all milk. This sort of advertising is not unlike that of 
a whisky dealer who proclaimed his brand of goods as 
"the whisky without a headache," little realizing that in 
calling attention to the fact that most whisky does pro- 
duce a headache, he was putting not only others but him- 
self out of business.^ 

Constructive advertising is needed—the kind, for ex- 
ample, that suggests specific ways for using milk. Dairy- 
men can well learn a lesson from some of the western fruit 
growers. The latter have published recipes for preparing 

^ Editorial, Tobacco Leaf, Jan. 8, 1920, p. 4. 



lo THE MARKETING OF WHOLE MILK 

tempting dishes which call for their product as the princi- 
pal ingredient. These recipes are accompanied by most 
attractively colored illustrations.^ Some constructive ad- 
vertising, as a matter of fact, is now being done to in- 
crease the use of milk. A campaign under way in Iowa, 
aiming to teach school children the high food value of the 
product, is resulting in a substantial increase in con- 
sumption. The children are urged to use milk as a part 
of the noonday lunch. The increase in some places is es- 
timated to be as high as from ten to twenty-five per cent. 

As regards the consumption of condensed and powdered 
milk there are tremendous possibilities for expansion. The 
United States Department of Agriculture estimates that 
the daily per capita consumption of condensed milk is but 
0.49 ounce and of powdered milk 0.012 ounce.^ 

Section j. Regularity of Production and Consumption 

Milk as a market commodity differs from most other 
commodities in the regularity with which it is produced 
and consumed. Milk production is a regular, every-day 
job. There is no let-up for Sundays or holidays. Even 
a "strike" does not hinder production — it may mean de- 
struction of part of the product for the period of the strike, 
but to leave cows unmilked for one day might cause irrep- 
arable damage. Consequently production must be con- 
tinued at nearly full speed or be entirely discontinued for 
the better part of a year at least. 

Consumption likewise is quite regular. In the use of 
milk as a food for very young children and as a part of 
customary breakfast dishes, consumption is regular and 

1 See advertising pages of Ladies' Rome Journal, Saturday Evening Post, and 
Pictorial Review during 1918 and 1919. 
* Weekly News Letter, Nov. 19, 1919, p. 5, 



MILK AS A MARKET COMMODITY 



II 



almost constant. Because of its perishability and be- 
cause there is no adequate substitute for milk for these 
purposes it happens that it reaches the consumer regu- 
larly very soon after its production. A survey made by 
a committee of the International Association of Dairy 
and Milk Inspectors in the summer of 191 6 shows that 
the total age of milk when delivered to the consumer in a 
considerable number of cities averaged as follows: ^ 





Table V 








Maximum 


Minimum 


Average 


Night's milk 


25 hrs. 
16 hrs. 


12 hrs. 
5 hrs. 


16 hrs. 


Morning's milk 


9^ hrs. 







These estimates, however, obviously include milk de- 
livered directly by the producer himself. Around our 
larger cities the time is usually longer, generally from 
thirty-six to fifty hours for the evening's milk and from 
twenty-four to thirty-eight hours for the morning's milk. 
For example, in the case of such cities as Columbus, 
Ohio, Akron, Ohio, and Milwaukee, Wisconsin, where 
most or all of the milk goes right to the city plants of the 
dealers, the various steps follow each other about as fol- 
lows: Starting at the time the milking is about completed, 
at five p. M. on Sunday, let us say, the milk is put 
into cooling tanks in cans. Monday morning at about 
the same hour the morning's milking is completed and 
the milk started on its way, reaching the city plant about 
mid-day. During the afternoon it is processed, bottled, 
and placed in the refrigerator. Early Tuesday morning, 
usually between one a. m. and four a. m., it is loaded on 

^ International Association of Dairy & Milk Inspectors, gth Annual Report, 
1916, p. 49. 



12 THE MARKETING OF WHOLE MILK 

wagons and sent on its way toward the homes of the con- 
sumers, where it is delivered sometime during the forenoon 
of that day. A part of it, however, is dehvered to stores, 
in which case the consumers get it sometime during the 
day or even the following morning (Wednesday). The 
major portion of the evening's milk in these instances is 
not over forty hours old; the morning's milk is about 
twenty-eight hours old. The age is not much different in 
the case of very large cities, where the milk is received and 
bottled at country plants. The principal difference is that 
the milk is hauled to the city in refrigerator cars during 
the late afternoon or evening of the day on which the 
morning's milk leaves the farm of the producer. ^ 

Contrast this with butter, which is often held for eight 
or ten months before being consumed, or with cheese, 
which is held even longer. Perishable fruits and vegetables 
are of course also marketed in as short a time as possible 
after production, and the consumer doubtless receives 
those products which are grown near our large cities 
within twenty-four or forty-eight hours of the time the 
producer starts them on the road to the city. Large 
quantities of these perishables, however, are now brought 
to our cities from distant producing centers. In such 
cases a week or more often elapses between production 
and consumption. The less perishable fruits and vegeta- 
bles, — citrus fruits, apples, potatoes, — are often stored 
during the better part of a year. As regards some of the 
non-food products the period between production and 
consumption of the raw material is very much extended. 
Wool, for instance, often takes the better part of a year 
to move from producer to manufacturer; another year is 

1 Milk Dealer's Letter No. 7, Sept., 1914, U. S. Dept. of Agr.; Wisconsin Bui. 
285, Marketing Wisconsin Milk, p. 28. 



MILK AS A MARKET COMMODITY 13 

likely to elapse before the manufactured clothing is placed 
in the hands of the consumer. 

There is, of course, an exception in the case of con- 
densed, evaporated, and powdered milks. These are often 
stored for considerable periods and later used for many of 
the purposes for which fluid milk is ordinarily used. As a 
matter of fact, the perfection of these processes may in 
the future make possible and bring about greater irregu- 
larity both in the production and consumption of milk. 

Section ^. Milk Distribution Affected with a Public Interest 

Milk as a market commodity has been hampered by 
numerous restrictions for many years both in its produc- 
tion and in its distribution. Dairymen have been com- 
pelled to remodel their barns to conform to certain speci- 
fications; peddlers are compelled to deliver their milk in 
expensive bottles instead of by the cheaper bulk method; 
city dealers have had to install high-priced pasteurizing 
machinery in their plants. These and other restrictions 
have been placed in the name of the public interest. Re- 
cently a number of investigational committees have recom- 
mended that the distribution of milk be declared a public 
service. Such was the recommendation of the Wicks Com- 
mittee in New York in 1916^ and of the Governors' Tri- 
State Milk Commission in Pennsylvania in 1917^ the 
latter advising that the milk business be considered a 
"quasi-public business." 

What is necessary in order that a business be affected 
with a public interest? In Munn vs. ///., 94 U. S. 113, 
Chief Justice Waite says: "When . . . one devotes his 

^ Dairy Products, Livestock & Poultry, — N. Y. — 1917, p. 578. 

2 Governors' Tri-State Milk Commission Report, Harrisburg, Pa., p. 45. 



14 THE MARKETING OF WHOLE MILK 

property to a use in which the public has an interest, he, 
in effect, grants to the public an interest in that use, and 
must submit to be controlled by the public for the com- 
mon good to the extent of the interest he has thus created. 
He may withdraw his grant by discontinuing the use; 
but, so long as he maintains the use, he must submit to 
the control." 

Obviously the milk dealer grants to the public an inter- 
est in his business, since the business undeniably affects 
public welfare; first, physical welfare, that is, freedom from 
disease; second, economic welfare, that is, protection from 
the extortions of a monopoly and from the frauds of adul- 
terators. A great amount of the literature dealing with 
the milk business is devoted to a consideration of its dis- 
ease-carrying properties. MacNutt, for example, has 
brought together many compilations of statistics showing 
hundreds of instances of the transmission of disease germs 
through milk.i Moreover, as was shown in Section i, 
milk meets a particularly essential need, a need which can- 
not be satisfied by means of substitutes, a need which 
is so important that the nation cannot afford to allow it 
to remain unsatisfied. The public is then vitally concerned 
in the handling of a food which is at once so potent a car- 
rier of disease and such a necessity, and therefore the milk 
business is affected with a public interest. 

It is sometimes said that if this is true of the milk busi- 
ness, the same must be true of the distribution of meat and 
of other foods. Meat and milk, to be sure, are comparable 
in so far as both are easily contaminated and are likely to 
harbor disease germs. Milk, however, is much more 
likely to be a germ carrier, first, because it is a better me- 
dium for the development of bacterial life; second, because 

1 MacNutt, J. S., The Modern Milk Problem, pp 22 to 29, 



MILK AS A MARKET COMMODITY 15 

a small amount of infection will contaminate a large 
quantity of milk; and third, because milk is very largely 
consumed raw, whereas meat is almost invariably cooked 
before it is used. Even the sanitation of the meat supply, 
however, is considered of such importance that the fed- 
eral government inspects all animals slaughtered at the 
larger slaughterhouses, particularly those which do an 
interstate and international business. It has been esti- 
mated that this inspection covers approximately one-half 
the animals slaughtered in the United States.^ 

As regards bread and similar foods, the need for rigid con- 
trol is again less urgent than in the case of milk. Though 
such foods as a group are probably about as vital as milk, 
yet any one of them may be replaced with a substitute. 
Again, most of these foods can be stored for a longer time 
and hence are not produced or consumed with the same 
degree of regularity. Bread, for example, can be obtained 
from the bakery or it may be made in the home as 
needed. Hence the public is not so dependent upon the 
existence of a constant supply stream. 

It would seem fair to conclude then that milk distribu- 
tion is affected with a public interest to a greater degree 
than is the distribution of most other food products and 
is justly subject to such regulations as the public interest 
may dictate. 

Leaving until a later chapter the discussion of regula- 
tions having to do with the economic aspects of the milk 
business, let us consider further those regulations which 
relate more particularly to the health problems of milk 
distribution. 

^ Hemenway, H. B., American Health Protection, p. 70. 



i6 THE MARKETING OF WHOLE MILK 

Section 5. Health Regulations Affecting the Marketing of 

Milk 

At the present time we are so accustomed to public reg- 
ulation of the milk business that such regulation is seldom 
contested in the courts. "Our municipal corporations," 
says Dillon, "are usually invested with express powers to 
preserve the health and safety of the inhabitants. This 
is indeed one of the chief purposes of local government, 
and reasonable by-laws in relation thereto have always 
been sustained in England as within the incidental author- 
ity of corporations to ordain. In determining the validity 
of ordinances adopted to promote the health and comfort 
of the inhabitants, it may be taken as firmly established 
that the State possesses, and therefore municipal corpora- 
tions under legislative sanction may exercise, the power 
to prescribe such regulations as may be reasonably neces- 
sary and appropriate for protection of public health and 
comfort, and that no person has an absolute right to be at 
all times and in all circumstances wholly free from re- 
straint. " ^ 

Probably among the earliest recorded instances of milk 
regulation is that of the Senate of Vienna in 1599, which 
forbade the sale of milk, butter, and cheese for a time on 
account of an epidemic which was believed to have origi- 
nated from dairy products.^ A milk ordinance passed in 
Paris in 1743 regulating the feeding of cows and an ordi- 
nance passed in Hamburg in 181 8 are other instances of 
early milk regulation. ^ The first law providing for dairy 
regulation in this country was passed in Massachusetts 

1 Dillon, Municipal Corporations, Vol. 2, p. 1022. 

2 Milk Reporter, Oct., 1919, p. 15, quoting Paul G. Heineman in Milk. 
» Ibid. 



MILK AS A MARKET COMMODITY 



17 



in 1856 against the adulteration of milk by adding 
water. ^ 

In 1859 the same state passed a law prohibiting the feed- 
ing of brewery waste to cattle and also a law calling for 
the appointment of inspectors and defining their duties. 
It was not until 1880 that the same state enacted a law 
fixing a minimum standard for total milk solids. Parker 
gives a list of seventy-seven American cities with the date 
of earliest inspection of dairies in each. A few of them are 
as follows (including most of the early instances) : ^ 



Table VI 

Earliest Dairy Inspection in Various American Cities 



Boston, Mass .... 
Providence, R. I.. . 
Syracuse, N. Y. . . 
Hartford, Conn. . 

Newark, N. J 

Buflralo, N. Y. . . . 

Pittsburg, Pa. 

Philadelphia, Pa. . 
Rochester, N. Y. . 
Mt. Clair, N.J... 
New York, N. Y.. 
Washington, D. C, 



Earliest collections 


Earliest dairy 


of samples 


inspection 


1859 


190S 


1870 


1906 


1877 


1907 


1896 


1908 


1885 


1882 


1885 




1888 




1890 




1891 


1898 


1894 


1896 


189s 


1902 


1871 


1895 



In most instances early attempts at regulation were 
directed against adulteration, a practice which was 
widely prevalent. In 1883 about 60 per cent of Boston 

1 Kelley, Ernest, International Institute of Dairy and Milk Inspectors, 19 15, 
p. 80. 

2 Parker, H. N., City Milk Supply, p. 371. 



i8 THE MARKETING OF WHOLE MILK 

milk was reported to be adulterated. ^ In 1884 75 per cent 
of New York milk is said to have been adulterated by the 
addition of water and diluted by skimming.^ 

For many years, in fact until quite recently, the attitude 
of farmers has been one of opposition to any kind of regu- 
lation by health authorities. In 1909, for example, the 
attempt on the part of the city of Chicago to pass an or- 
dinance requiring that all milk coming to the city be from 
tuberculin tested herds or be pasteurized resulted in the 
calling of a meeting of the milk producers of that section. 
Instead of fighting this ordinance, however, as was first 
proposed, this group of farmers took a rather advanced at- 
titude for that time in adopting the slogan "Give Chicago 
what she wants but make her pay for it." In 191 1, how- 
ever, the farmers of the Chicago district succeeded in get- 
ting a law passed making it "unlawful for any city, village, 
incorporated town, county, or other incorporated author- 
ity, by ordinance or otherwise, to require the tuberculin 
test to be applied to dairy animals as a means of regulat- 
ing and purifying milk, skimmed milk, cream, and other 
dairy products. Every such ordinance or regulation 
by any corporate authority other than the State of Illi- 
nois is declared void. "^ In 1914 the Milwaukee Milk Pro- 
ducers' Association boycotted the city of Milwaukee and 
withheld a large proportion of the city's milk supply dur- 
ing the first two weeks in July because the city insisted 
on requiring that all cows be tuberculin tested or the milk 
pasteurized. 

As illustrative of the extent to which the attitude of 

1 Country Gentleman, Apr. 12, 1888, p. 290, quoting 29th Annual Report of 
the Inspector of Milk & Vinegar for the City of Boston. 
'^ Wilson, Chas. S., Ohio Farmer, Dec. 6, 1919, p. 698. 
' Jordan, E. 0., The Municipal Regulation of Milk Supply, 1913. 



MILK AS A MARKET COMMODITY 19 

farmers has changed on this subject is the fact that the 
Milwaukee Milk Producers' Association is at the present 
time planning to cooperate with the Board of Health in 
taking care of country inspection of milk and milk sources. 
Other progressive organizations are taking a similar atti- 
tude. The Dairymen's Co-Operative Sales Company is 
working with the Pittsburg health authorities, and at a 
meeting of the board of directiors of the New York 
Dairymen's League the following resolution was passed: 
"Resolved, That we recommend to the governor's milk 
committee that beginning December i, (1919) no ' Grade 
C ' milk will be recognized in the league contracts for sale 
of league milk, it being the opinion of farmers that all milk 
should be produced under such sanitary conditions as to 
enable it to be classed at the lowest as * Class B ' milk. " 
At its annual meeting at Canton, Ohio, December, 191 8, 
the Ohio State Grange took a stand favoring more modern 
methods of milk inspection and recommended the bacte- 
rial count as a means of judging quality.^ 

As has been recently stated, many producers are begin- 
ning " to recognize the economic worth of regulations first 
recommended for sanitary reasons. "^ Thus the more pro- 
gressive dairymen consider it good business to have their 
cows tuberculin tested; to have light, well- ventilated 
barns; to use small- topped or partly covered pails; to prac- 
tice prompt cooling; to sterilize milk utensils; and even to 
pasteurize the milk. They consider the adoption of such 
methods good business because it results in healthier cows, 
better satisfied customers, and fewer complaints. 

During recent years there has been a noticeable shift 

* National Stockman i^ Farmer, Jan. 4, 1919, p. 27. 

2 Klein, Dr. Louis, U. of Pa., in address before Pennsylvania State Medical 
Society, 1916. 



20 THE MARKETING OF WHOLE MILK 

from the stressing of mere conditions as indicative of qual- 
ity to the stressing of the bacterial count, supplemented 
by the sediment test. The shift was given impetus by 
an experiment carried on in 1903 at Pennington, New Jer- 
sey, where for a whole year daily bacterial tests were made 
on milk produced in two barns not over one hundred feet 
apart on the same farm. One barn, equipped to comply 
with score card ideals, cost over twenty thousand dollars. 
The other, an old-fashioned stable with no sanitary feat- 
ures, cost not more than four hundred dollars. The year's 
results showed that the milk produced in the old barn was 
practically as good as that produced in the high-priced barn ^ 
and that the dairyman is more important than the dairy. 

In 1 910 the experiment was carried further on a large 
scale. Seventy-one dairy farmers near Homer, New York, 
were paid a premium for extra quality in milk as shown 
by bacterial tests. The farmers received instructions as 
to how to produce clean milk, and the results of the 
tests were posted with sufficient frequency to let each 
farmer know just where he stood. The majority of these 
farmers were able to produce milk containing less than 
ten thousand bacteria per cubic centimeter even in hot 
weather.2 This experiment clearly proves that more de- 
pends upon the man and his methods than upon mere 
conditions. 

A novel test was made near the two towns of Oxford 
and Kelton, Pennsylvania, in 191 5. Ten Oxford dairy- 
men who had learned to produce clean milk paired off 
with ten Kelton dairy farmers for one day, in order to 
see what could be done by good dairymen even on farms 
with which they were not familiar. The Kelton dairy- 
men had never attempted to produce high grade milk. 

1 North, C. E., Farmers' Clean Milk Book, p. 78. ^ /^,-^.^ p. gi. 



MILK AS A MARKET COMMODITY 21 

The result as measured by bacterial count is shown by 
the following table, giving the count in milk produced 
by Kelton dairymen on their own farms on April 5 and 
by Oxford dairymen in the barns of the Kelton dairy- 
men on April 6. 

Table VII i 

Bacterial Tests of Milk Produced in Kelton Dairies 

By Kelton dairymen, April 5 By Oxford dairymen, April 6 

1,830,000 3,300 

1,520,000 3 J 100 

4,830,000 4,600 

4,000,000 7,000 

1,450,000 4,100 

3,600,000 61,000 

60,000 800 

2,500 

70,000 1,600 

500,000 5,600 



In 191 5 the Geneva (N. Y.) Experiment Station pub- 
lished a comparison of bacterial counts and barn scores.^ 
It compared on thirty-four farms the bacterial count with 
the barn and method scores as established by the New 
York City score card and the United States Department 
of Agriculture score card. Taking the four ranking high- 
est according to the New York City score card, we have 
the following comparison: 

Table VIII 

Rank according to: 

New York City score U. S. Dept. of Agri. score Bacterial count 

1 1 30 

2 2 16 

3 3 18 

4 IS 13 

1 North, C. E., Farmers' Clean Milk Book, p. 113. 

2 Bui. 348, p. 120, N. Y. Agri. Experiment Station. 



22 THE MARKETING OF WHOLE MILK 

It will be noticed that there is a wide divergence between 
the results of the score cards and the bacterial count. If 
we take the highest four scores according to the New York 
City method, the ranks are respectively 30, 16, 18, and 13 
as regards bacterial count; that is, milk produced on the 
farm ranking highest according to the New York City 
score card ranked thirtieth when subjected to the bac- 
terial count test. The same station had already shown 
that certain requirements exacted of dairymen did not 
help in producing more sanitary milk.^ The United States 
Department of Agriculture has shown that the amount 
of sediment indicated by the sediment tester is no adequate 
criterion of cleanliness, since the dairymen may strain out 
the coarse particles of dirt by the use of cotton gauze 
strainers. 2 Straining out filth does not make clean milk, 
nor does clarification. But either may make it appear 
clean, even when examined by means of a sediment tester. 
On the other hand, germ content alone is also an unsafe 
guide, for a great deal depends upon the kind of germs 
present. 

It is now coming to be quite definitely accepted that, 
given a reasonably low bacterial count as an indication of 
decency in production and handling, the element of safety 
can be added by pasteurization. When first introduced, 
pasteurization was often practiced covertly on account of 
public prejudice against it.^ Gradually, however, the 
leading dealers came to adopt the practice openly. One 
Baltimore dealer pasteurized milk for infants as early as 
1893, and "pasteurization was begun in Cincinnati in 1897, 
in New York in 1898, in Philadelphia in 1899, in St. Louis 

1 Bui. 365, p. 197. 

2 U. S. Dept. of Agr. Bulletin 361. 

2 Parker, H. N., City Milk Supply, p. 269. 



MILK AS A MARKET COMMODITY 



23 



in 1900, in Milwaukee in 1903, in Boston and in Chicago 
in 1908." ^ 

The first city to make pasteurization compulsory was 
Chicago, which in August, 1908, passed an ordinance re- 
quiring that after January i, 1909, all milk, unless from 
tuberculin tested cows, offered for sale in the city be 
pasteurized.^ Since that time quite a number of other 
cities have made pasteurization compulsory. Spargo 
shows that pasteurization was in 1908 required or offi- 
cially encouraged in forty-six of fifty-two leading cities of 
the United States. He gives figures showing that in many 
of the cities from 90 to 97 per cent of the milk supply was 
pasteurized, and that the larger cities for the most part 
had the greatest percentage of pasteurized milk. 

The situation as found in the cities of Wisconsin in the 
summer of 191 6 is probably more or less typical of the sit- 
uation in other parts of the country. The following table 
shows the extent to which pasteurization was carried on 
in some of the cities of the state at that time.^ 

Table IX 
Raw and Pasteurized Milk Used in Cities of Various Sizes in Wisconsin, igi6 



City 


Population 
in igi6 


Raw milk, 
percentage 


Pasteurized milk, 
percentage 


Milwaukee 

Oshkosh 

Green Bay 


436,535 
36,065 

29,353 
18,807 
18,072 


8.5 
91.4 
26.0 
80.2 
43-2 


91-5 
8.6 
74.0 
19.8 
56.8 


Eau Claire 

Beloit 





1 Parker, H. N., City Milk Supply, p. 269. 

2 Straus, Lina G., Disease in Milk, p. 70. 

3 Wis. Agr. Exp. Sta. Bui. 285, p. 8, 



24 THE MARKETING OF WHOLE MILK 

Although milk comes from far outside the boundaries 
of most cities, often across numerous state lines, — New 
York City at times draws milk from seven states and 
from two Canadian provinces ^ — cities have relatively 
little trouble in finding means of controlling their milk 
supplies. 

Four principal methods are at present in use for safe- 
guarding the milk supply of cities and towns: first, con- 
trol of source of production and distribution, usually by 
means of some system of permits or licenses. This method 
is commonly combined with inspection of premises and 
examination of milk sold. It makes possible control of 
production of milk outside of the city's boundaries and 
even outside of the state in which the city is located. 
New York City, for example, imposes restrictions upon 
the producers in other states as well as in the state of New 
York. It does this by barring all milk which does not 
comply with specified requirements and which is produced 
by men who do not permit its inspectors to make exam- 
inations of premises at all times. The second method in 
use for the control of the milk supply of cities and towns 
is controlled by examination of milk sold, which method 
is usually limited to the larger cities, where laboratories 
are available for analysis of samples. By checking up on 
each producer's milk reaching the plants, a small force 
can control a large area, since only farms with a high count 
need be inspected often. The third method is the safe- 
guarding of consumers by means of pasteurization of the 
milk supply. This method is commonly used in combi- 
nation with the other two and is seldom relied upon as the 
sole method. 

The fourth method is publicity. In some of the smaller 

^ Brown, Lucius P., in Report 0/ Special Milk Board of Mass., 1916, 221. 



MILK AS A MARKET COMMODITY 



25 



cities particularly, the frequent publication of barn or milk 
plant scores or of the bacterial counts of the milk produced 
by each dealer has had a very salutary effect. The Board 
of Health of Lexington, Kentucky, for example, has been 
for a number of years publishing monthly a chart (see 
Figure i) showing by means of parallel bars the bacterial 



OFTh 


DIA6R 

SHOWING THE BACTE 
E LEXINGTON MiLK Si 


AM 

[RIAL COUNTS 
PPLY FOR J UN. 191 7 


ClSnixoc Divirr C 


■SiiTT-^^F"----*--''" 


-._ -I-. - ic _ i.soo 

« V r n fr. r 4 3.4 25 


rsiflSit, w K. > 


.J 1 jj — 1 — 1 








. _ . 11.400 


Hosts, r. S' r 

iHUWr. J. L. 5 

Sirrr, w s. ■ 
inflmay. pur • 
jncces. v» «. • 
coLirns. ft. 0. • 

/••SOKJMf 6iOS. ■ 

ftwKftjra*. H.e. t 
scena ssiy • 
snui-nftMu'iaarso' 
««». J w. ■ 
BfLUKUi. c t ' 

avaci. J ». 'cuTMi' 

BTTLt. J I, ' 




._ . _ 1 %0OO 




. __ _. ; aooo 




.: . . _ .. 'aooo 






^_ _ _ ..... j 1 j 


._. . .. -. 25000 




. . . _. l?A°o 




. 2Sd4o 


. ^; 1 ! 1 1 _ U_ _L 


.;._ -- . 25'«4.o 




MM ' i 


. ' si.aoo 






_._ _ 3i,eoo 




1 . 1 1 ! 1 < 1 1 i 1 1 1 


:;__ . _ sr.aoo 






. _ ^ . 3500O. 


T. 1 11 111'.:".. _LL 


. . _ It _ _|_ _ 38,(60 


-mni [;iniiiiitf#iwt 


LT c n ui/. T 3R.1 60 

J&u.Li^i^i S 9.736 

_ . _. € 0.Q0O 




^ TiTtT 


:::. ._ . .. eJioo 


clkp'L'. eziDi' »■ 
e^awii 1 MVI5 H"! 












. _ _ 6 9960 




T _ 16,320 




8 300(? 






«L«, fosr£ft 
Hill-, 0. ft. 


~ 


■■! 


:::"::"::"::::::::::- .:: f 5.400 


oh' " ' ' ' Zti 




VlTOH. ftftl- 1^!" 
UtRDON, W-R. ^"^ 

H/;S6flftO. L H. !«?«* 
WH/ri . 8. P. —^ 
WflOE, ft../. ?-~ 

«'ci/oor, c.«. "M!" 
KwuiNs. CO msr^ 

ROS£R. W. £. "— — 


r-^J 


- iz£qoo 

_ 1 ztzoo 




. . :_ .: -::;: zztsizoo 


a^di i 


. - . . . IStiOO 




_ -. ,. """ ZZ J a I'yoo 

) 9 0,800 








----- - 2i44-00 

- - -- - 286,000 


scHi/H/mr.j. w. 6 

CftHllL. MWD ^ 


==gg£a.|||||iHiiiiiiiiiiiiii 


- - -- -- - asSooo 

. . -_ - - - 3/ 8.000 




■ri^ 






GMOLOf, kV.C. 


uf^iiL^iJiiiUJiiimiiiiin 


. ait aa£ti4a2,250 

_ ax £«fli£65E 2.600 



Fig. I. — Diagram Showing the Bacterial Counts of the Lexington (Ky.) Milk 
Supply for June, 1917. 

count of each dairyman's milk. The advertising done 
by a progressive dairyman has often accomplished the 
same results by compelling other dairymen to institute 
more up-to-date methods. Such was the case in Beloit, 
Wisconsin, where in 191 6 there was practically no control 
of any sort, yet milk of a high grade was being sold. Some 
very poor, if not actually dangerous, milk was, however. 



26 THE MARKETING OF WHOLE MILK 

also being sold, and this is the weakness of this method 
when used alone, — namely, that it does not reach all 
producers. 

The question often arises as to who should regulate. 
In most instances regulation is done by the cities. The 
larger cities in particular usually go far beyond state re- 
quirements. Chicago and Milwaukee, for example, passed 
their tuberculin test ordinances before such legislation was 
even seriously contemplated for the entire state, and, as 
a matter of fact, such legislation has not been passed up 
to the present time in these states. In 191 6 New York 
maintained a force of twenty country inspectors, three 
inspectors of city terminals, fifteen inspectors for the city 
proper and a supervisor for each of the two larger groups, 
making a force of forty- two men in addition to the neces- 
sary clerical and laboratory force which the city main- 
tains. New York City also has elaborate laboratory 
facilities for this work. All of this is over and above 
regulatory machinery which the state itself sees fit to 
maintain. 

There are, however, some disadvantages to city inspec- 
tion of milk and milk sources. In case of a milk shortage 
the city authorities arc likely to be lax in the enforcement 
of important health requirements in order to secure the 
desired supply. Milwaukee, for example, in 1914 allowed 
milk to come in on the mere promise that the farmers 
would shortly comply with the requirements. In this 
way the city hoped to force the boycotting farmers to 
come to terms. Moreover, in case of milk shortage, the city 
with the stringent regulations is likely to suffer. In the 
summer of 191 8 the city of Columbus was so short of milk 
that some dealers were unable to supply all of their cus- 
tomers. Springfield, however, only forty-four miles away. 



MILK AS A MARKET COMMODITY 27 

had plenty of milk, but it was not available to Columbus 
because Springfield had practically no health regulations 
in force and therefore Columbus health authorities refused 
to permit the milk to be brought in. 

To some extent, also, a city like New York or Boston 
carries the burden of inspection for much of the surround- 
ing territory. A few years ago the city of Boston, claim- 
ing that the city itself was carrying the burden for sur- 
rounding towns, attempted to get the state to undertake 
inspection. 1 

State control, as has occasionally been stated, would 
undoubtedly be desirable from some points of view. In 
many instances at the present time where the milk zones of 
different cities overlap, there is considerable duplication of 
inspection, as, for example, in the case of a dairyman who 
wishes to be in a position to choose among several markets. 
Some milk shipping stations actually send milk to several 
cities regularly, and are subject to the inspection at fre- 
quent intervals of several sets of milk inspectors. ^ 

From the point of view of public expenditure state in- 
spection would be somewhat of a saving, since the state 
should be able to maintain adequate inspection more 
cheaply than each municipality can maintain its own force. 
In Essex County, New Jersey, sixteen municipalities are 
reported to be maintaining independent inspection forces.^ 
Efficient state control should cost no more, certainly, 
than the combined control of many cities for the same sort 
of service. Any added cost would probably be due to the 
better service rendered to the smaller cities, which at the 
present time are extremely lax in their methods. Thus 

^ Report of Special Milk Board of Massachusetts, igi6, p. 15. 

* New York Report on Dairy Products, Livestock and Poultry, 1917, p. 685. 

' King, Clyde L., Lower Living Costs in Cities, p. 213. 



28 THE MARKETING OF WHOLE MILK 

early in 191 9 a government investigation showed that of 
1,327 cities and towns only 265 had regular dairy and milk 
inspection. Less than one-seventh of the cities with a pop- 
ulation between five thousand and twenty-five thousand 
reported any dairy inspection.^ 

It is a question, however, whether in a state like New 
York or like Illinois the larger cities would be satisfied with 
such inspection as the state would be willing to give.^ Al- 
though in most states with no large cities, state inspection 
would doubtless be found satisfactory and adequate, under 
existing conditions the states can do most good by co- 
operating with cities, especially with those cities which do 
not have adequate facilities for inspection. 

Federal regulation, of course, is out of the question, 
since it can regulate only such milk supply as crosses state 
lines. Instead of improving the milk supply, federal reg- 
ulations would merely keep milk within state lines and 
often give farmers in one state a practical monopoly of the 
milk business for certain cities.^ 

An attempt was made in 191 6 to determine the extent 
to which the marketing of milk is regulated by the various 
cities and villages of Wisconsin. The results are more or 
less typical of conditions in other sections of the country. 
Letters were sent to 128 cities and incorporated towns. 
Replies from 120 of these indicate that milkmen are re- 
quired to be licensed in 26, and 12 of the 120 stores which 
deal in milk are required to be licensed. Through the Mu- 
nicipal Reference Bureau of the Extension Division of 
the University of Wisconsin an attempt was made to 

^ Creamery and Milk Plant Monthly, May, 1919, p. 37. 

^ New York Report on Dairy Products, Livestock and Poultry, 1917, p. 672. 

^ Address of Dr. Carl Alsberg, Chief of Bureau of Chemistry, U. S. Dept. of 
Agr., Twenty-third Annual Report of Ohio State Dairymen's Association, 1917, 
p. 94. 



MILK AS A MARKET COMMODITY 29 

secure copies of all existing milk ordinances. Letters 
sent to all the cities, towns, and villages of a thousand 
or over brought 78 replies. Of these 29, including one 
village, had ordinances. A study of the provisions of 26 
of these reveals the following provisions which are im- 
portant to the milkman: ^ 

„ . . Number of 

rrovisions 

instances 

1. Inspection of dairies required (inspection specifically 

authorized in nearly every case) 15 

2. License required for milkman 22 

3. Certificate required showing herd to be free from 

dangerous diseases, especially tuberculosis, test for 
the latter being usually specifically mentioned 15 

4. Specific exemption for pasteurized milk as to Provi- 

sion 3 3 

5. Specific regulations as to handling of milk 13 

6. Covered wagon required for delivering milk 3 

7. Forbidding use of any but single service milk tickets. . 3 

8. Requiring higher percentage of total solids than is re- 

quired by state law (state law required ii^%, 
whereas the 7 cities referred to required 12% 7 

9. Specifying a bacterial count (lowest 250,000, highest 

500,000 to the cubic centimeter) 8 

10. Requirement of a fee, usually ^i per year; sometimes 
based on the number of cows (10 cents or more a 
cow), sometimes on the number of delivery wagons 
(50 cents to $1 a wagon) ,. 21 

In the spring of 191 8 the Dairy Division of the United 
States Department of Agriculture sent inquiries to all 
cities of over five thousand population and received re- 
plies to its questionnaire from 481 cities. The question- 

1 Wis. Agr. Exp. Sta. Bui. 285, p. 15. 



30 THE MARKETING OF WHOLE MILK 

naire brought out the following facts as to the extent of 
inspection in the various cities: 

Table X 

Extent, of Inspection in Group of U. S. Cities, 1918 ^ 



Size of cities 


Percentage of cities in which complete 
analysis and dairy inspection occurred 


5,000 to 25,000 


II. 6 


25,000 to 50,000 

50,000 to 100,000 


Si-4 
59-4 
85-3 
88.0 


100,000 to 500,000 

500,000 and over 



The points which ordinarily come under control are the 
following: 

1. Chemical standards 

a. Determination of butterfat and of solids not fat. 

b. Detection of watering or of skimming. 

c. Detection of the presence of preservatives or of other 

adulterants. 

2. Temperature. 

3. Bacterial content. 

4. Pasteurization; where required the precise method, time, 

and temperature are often specified. Repasteurization is 
usually prohibited. 

5. Sanitation; the score card method is most usual, since it 

gives the inspector a guide to follow. 

6. Health of cows as regards : 

a. Tuberculosis. 

b. Other diseases. 

c. Date of freshening. 

7. Health of men engaged in dairies. 

8. Compulsory bottling (prohibition of street dipping). 

^ International Association of Dairy and Milk Inspectors, 1918, p. 128. 



MILK AS A MARKET COMMODITY 



31 



Though such a multitude of regulations undoubtedly 
hampers the producers and distributors, and though many 
of them are doubtless superfluous, the results of public con- 
trol amply justify any incumbrances placed on the milk 
business. A few rather striking examples may serve to 
illustrate this point. The results of milk inspection in Ith- 
aca, New York, show that whereas in 1907 the aver- 
age bacterial count of milk examined was 760,250 per 
cubic centimeter, in 1914 the average count was but 
142,860. In 1907 only 10.59 P^^ ^^^^ °^ ^^^ samples 
showed a bacterial count of less than 10,000 per cubic 
centimeter, whereas in 191 8 48 per cent fell in this 
group. ^ The death rate per thousand in New York City 
has been decreasing rather rapidly, and part of this de- 
crease is very generally ascribed to the improvement in 
the milk supply.^ The following figures are given: 

Table XI 
Decrease in Infant Mortality in New York City, i8gi-igi6 



Year 


Deaths per one thousand annually 
among children under five years 
of age 


Annual rate, July 
and August only 


i8gi 


96.5 
96.2 

37-S 
34-0 


121;. I 


1802 


I^I.Z 


IQIC 


4.1.6 


1016. . 


'?Q. ^ 







In addition to this increased safety given by public con- 
trol there is the gain from a decrease in the amount of 
adulteration and from a general improvement in the milk 

^ International Association of Dairy and Milk Inspectors, 1915, p. 157. 
2 Straus, Lina G., Disease in Milk, pp. 90-91. 



32 THE MARKETING OF WHOLE MILK 

supply, much of which could scarcely have been brought 
about by competition alone. 

Section 6. Standards and Grades 

Legal standards for milk are quite necessary. In the 
first place, the consumer cannot determine for himself 
whether the milk complies with his particular consump- 
tion standard or not. Though he can in a general way tell 
whether milk is deficient in fat and in solids not fat, there 
is a wide range within which he cannot distinguish. That 
being the case, there is always the temptation for competi- 
tors to cut down slightly in the quality, as measured by 
fat content particularly. Hence competition often reduces 
rather than improves the quality. As for sanitary condi- 
tions under which the milk is handled and as to its safety 
with regard to its germ-carrying possibilities, the con- 
sumer is entirely in the dark. The result is that the hon- 
est producer and the honest distributor are penalized, since 
the dishonest man can sell an inferior milk at the same 
price that the better milk brings. 

Government standards are usually minimum standards, 
and it often appears that there is a tendency for them to 
become also maximum standards. For example, where 
there is a minimum requirement of 3.25 per cent fat, the 
dealers are inclined to market milk which comes as near 
this minimum standard as possible without too much risk 
of occasionally dropping below. There are, however, in- 
stances where competition seems to keep the quality rather 
high. In Columbus, Ohio, though the city minimum is 3 
per cent, a considerable proportion of milk sold is 4 per 
cent or better, which the dealers claim is about the stand- 
ard demanded by consumers. 



MILK AS A MARKET COMMODITY 33 

Since existing local standards vary more or less in dif- 
ferent parts of the country, the United States Department 
of Agriculture has issued the following as "Food Inspec- 
tion Decision 178," adopted as a guide for officials in en- 
forcing the Food and Drugs Act: 

"i. Milk is the whole, fresh, clean, lacteal secretion obtained 
by the complete milking of one or more healthy cows, properly 
fed and kept, excluding that obtained within fifteen days before 
and five days after calving, or such longer period as may be 
necessary to render the milk practically colostrum free. 

"2. Skimmed milk is milk from which substantially all of 
the milk fat has been removed. 



"5. Pasteurized milk is milk that has been subjected to a 
temperature not lower than 145 degrees Fahrenheit for not less 
than thirty minutes. Unless it is bottled hot, it is promptly 
cooled to 50 degrees Fahrenheit or lower. 

"7. Homogenized milk or homogenized cream is milk or 
cream that has been mechanically treated in such a manner as 
to alter its physical properties, with particular reference to the 
condition and appearance of the fat globules." 

The Bureau of Chemistry of the United States De- 
partment of Agriculture in 191 8 issued the following list 
of standards as found on the statute books of the states 
indicated: ^ 

^ Rules and Regulations for the Production of Clean and Safe Milk. Bu. 
of Chemistry, U. S. Dept. of Agr. Jan. 28, 1918. Mimeographed Pamphlet, 
page 12. 



34 



THE MARKETING OF WHOLE MILK 



Table XII 

Milk Standards 



States 



California 

Colorado 

Connecticut. . . . 

Idaho 

Iowa 

Kansas 

Louisiana 

Maine 

Massachusetts. . . 

Michigan 

Minnesota 

Mississippi 

Montana 

Nebraska 

New Hampshire. 

New Jersey 

New York 

North Dakota. . . 

Ohio 

Oklahoma 

Oregon 

Pennsylvania. . . 
South Dakota . . . 

Utah 

Vermont 

Wisconsin 



Total 
solids,^ 

% 



11-75 

II.OO 
12. OO 



11-75 
12.15 
12.50 
13.00 



12.00 
11.50 
11.50 
12.00 
12.00 
12.50 

12.00 

12.00 
12.50 



Solids 
not fat, 

% 


Fat, 

% 


8.50 


3 -OO 






3 


00 


8 


50 


3 


25 


8 


00 


3 


20 






3 


00 






3 


25 


8 


50 


3 


50 






3 


25 






3 


35 






3 


00 






3 


25 


8 


50 


3 


25 






3 


00 






3 


00 






3 


00 






3 


00 






3 


00 






3 


00 


8 


50 


3 


20 






3 


50 






3 


20 


9 


25 






8 


50 


3 


00 



Prohibitions 



Days before 
calving 



15 



15 
IS 
IS 

14 



IS 
IS 



Days after 

calving 



' The composition of milk varies considerably. E. H. Farrington and F. W. 
WoU in their Testing Milk and Its Products give the following on the com- 
position of cows' milk: . 

Mtmmum 

Water 82.0 per cent 

Fat 2.3 

Casein and albumen 2.5 

Milk sugar 3.5 

Ash 6 



Maximum 


Average 


90.0 per cent. . 


. .87.4 per cent 


7.8 


3-7 


4-6 


3-2 


6.0 


S-O 


• 9 


•7 



MILK AS A MARKET COMMODITY 



35 



Ordinances of the various cities usually provide for 
standards conforming closely to state standards, although 
they frequently vary somewhat from those of the states. 
Following are the fat and total solids standards for a num- 
ber of cities and their respective states: 

Table XIII 
Comparison of State and City Milk Standards 



City 


Fat standard 


Solids {total) 


City, % 


State, % 


City, % 


State, % 


Chicago, 111 


3.0 
30 
3.0 

3-0 
3-0 
3 .0 
3-0 


3.0 

3-0 
3.0 
3.0 
3.0 
3-0 
3-S 


12.0 
II. 5 
12.0 
12.0 

ii-S 

12.0 
12.0 


II. s 
12.0 
12.0 
12.0 
12.0 


Cleveland, 

Youngstown, 

Columbus, 

Elyria, 


Milwaukee, Wis 

Pittsburg, Pa 


12.0 



In most cities milk is sold with no reference to grade. 
City inspection, where there is any, merely determines 
whether the product is fit for food at all. If it is, it may 
be sold as "milk." It is coming to be recognized, how- 
ever, that there are differences in the demands for milk 
which are legitimate and which can be met only at varying 
costs. For example, milk for infants must be of the very 
highest quality from a sanitary point of view at least. For 
cooking purposes, however, this is not so important, 
since there is no danger from even a rather high bacterial 
content in milk which is to be cooked. The latter grade 
can be produced at a much lower cost. 

Some few cities are now making allowance for such dif- 
ferences in demand by having milk graded and the vari- 
ous grades labeled in order that the consumer may know 
what grade he is getting and pay accordingly. These dif- 



36 THE MARKETING OF WHOLE MILK 

ferences form the broad, general basis of present grades 
of milk, namely: (a) milk for infants to drink; (b) milk for 
adults to drink; (c) milk for cooking only. Under each of 
these there should doubtless be a number of sub-grades 
based on fat content. The principal points which are 
considered in establishing the various grades are the food 
value and questions of safety and decency. 

Milk as found on the market might be classified as 
follows: 

1 . Ordinary milk 
{a) Raw 

{b) Pasteurized 

2. Graded milk (mostly raw) 
{a) Certified milk 

ib) Unofficial or so-called certified milk 

{c) Inspected milk 

{d) Miscellaneous special grades 

A very large part of the milk sold is ordinary milk, 
either raw or pasteurized. Practically all that is retailed 
directly by producers is raw, whereas much of that sold 
by dealers is pasteurized. About all that is required of 
ordinary milk as commonly sold is that it be clean enough 
to pass the inspection of the buyer, and that it and the 
conditions under which it is produced comply with state 
and city sanitary requirements as interpreted by state or 
city officials. 

What may be called graded milks are of a wide variety 
as far as names are concerned. Best known among these 
is certified milk. This term is properly applied to milk 
produced under the approval of a medical milk commis- 
sion. The" term "certified milk" originated with Dr. 
Henry L. Coit of Newark, New Jersey, who formulated 
the plan for the first medical milk commission, which was 



MILK AS A MARKET COMMODITY 37 

organized in 1893. In 1904 the term "certified" was 
registered in the United States Patent Office to protect 
it from being degraded by milkmen not under contract 
with a medical commission. There were in 1917 seventy- 
nine such medical milk commissions in the United States, 
all of them being members of the American Association 
of Medical Milk Commissions. A few states forbid the 
sale of milk as certified unless produced under the ap- 
proval of regularly organized medical milk commissions. 

Though most medical milk commissions are somewhat 
similar in character, there are some differences, as, for ex- 
ample, in the three commissions located respectively in 
Milwaukee, Chicago, and Minneapolis. The Milk Com- 
mission of the Milwaukee Medical Society is composed 
of nine members, all of them physicians. They are 
appointed yearly by the Milwaukee Medical Society, 
under which the commission operates. The expenses, in- 
cluding inspection expenses, are met by the producers of 
certified milk and are prorated on the basis of number of 
quarts sold in Milwaukee and suburbs. The inspecting 
is done by the commission and consists of monthly sani- 
tary inspection, monthly health inspection of employees, 
veterinary inspection at least every two weeks, and weekly 
examination of milk. All inspections are made without 
previous notice. The score card of the Dairy Division 
of the United States Department of Agriculture is used 
in the sanitary inspection. 

The Milk Commission of the Chicago Medical Society 
is composed of seven members, all physicians, elected for 
three years by the County Medical Society. The expenses 
are prorated to the different farms which choose to oper- 
ate under the commission. The inspection is done by the 
society on the basis of the government score card. 



38 THE MARKETING OF WHOLE MILK 

The Minneapolis Milk Commission is composed of three 
members, all physicians, one of whom is appointed each 
year by the incoming president of the Hennepin County 
Medical Society. The expenses are met by a tax of one- 
fourth cent on each gallon of milk sold. The tax is subject 
to a rebate of the unused portion. The inspecting is done 
by the commission, though the city health department and 
the state inspectors cooperate, the former making all neces- 
sary milk tests and the latter scoring the farms on the 
state score card. 

Though the publicity given the production and sale of 
certified milk has undoubtedly had a very beneficial in- 
fluence on the quality of the ordinary milk sold, the ac- 
tual amount of certified milk sold is relatively small. A 
New York producer of certified milk recently stated that 
there are only forty certified milk farms in the whole state 
of New York.i In other states the number is even smaller. 
Because of its high cost certified milk is and will continue 
to be put out at prices beyond the reach of most consumers. 

The state of New York has gone further than most 
other states or most cities in establishing grades of milk. 
In 1918 it issued a list of grades with rather elaborate reg- 
ulations. ^ They were as follows: 

Certified. 



Grade 


A, 


raw. 










Grade 
Grade 


A, 
B, 


pasteurized, 
raw. 










Grade 
Grade 


B, 

c. 


pasteurized, 
raw. 










Grade C, 
These are fu 


pasteurized. 
illy described in 


Regulation 


13 


of 


the Sani- 



1 Hoard's Dairyman, March 19, 1920, p. 574. 

2 Sanitary Code established by the Public Health Council — Albany. 



MILK AS A MARKET COMMODITY 39 

tary Code ^ and were based on the recommendations of 
Dr. C. E. North and others as given in the following re- 
port of a Committee on Milk Standards of the American 
Public Health Association. ^ 

The committee reports as follows: 

"i. Resolved that 'all milk should be classified by di- 
viding it into three grades which shall be designated by 
the letters of the alphabet.' The requirements for the 
three grades should be as follows: 

Grade A 

"2. Raw Milk. — Milk of this class should come from 
cows free from disease as determined by tuberculin tests 
and physical examinations by a qualified veterinarian, 
and should be produced and handled by employees free 
from disease as determined by medical inspection of a qual- 
ified physician, under sanitary conditions, such that the 
bacterial count does not exceed 10,000 per cubit centi- 
meter at the time of delivery to the consumer. It is rec- 
ommended that dairies from which this supply is obtained 
score at least 80 on the United States Bureau of Animal 
Industry score card. 

"3. Pasteurized Milk. — Milk of this class should come 
from cows free from disease as determined by physical ex- 
aminations by a qualified veterinarian, and be produced 
and handled under sanitary conditions, such that the bac- 
terial count at no time exceeds 200,000 per cubic centi- 
meter. All milk of this class should be pasteurized under 
official supervision, and the bacterial count should not 
exceed 10,000 per cubic centimeter at the time of delivery 

1 Sanitary Code established by the Public Health Council — ^Albany. See Ap- 
pendix A. 

2 American Journal of Public Health, Vol. 8 (1918), p. 228. 



40 THE MARKETING OF WHOLE MILK 

to the consumer. It is recommended that dairies from 
which this supply is obtained score at least 6^ on the 
United States Bureau of Animal Industry score card. 

Grade B 

"4. Milk of this class should come from cows free from 
disease as determined by physical examinations, of which 
one each year be by a qualified veterinarian, and should 
be produced and handled under sanitary conditions, such 
that the bacterial count at no time exceeds 1,000,000 per 
cubic centimeter. All milk of this class should be pas- 
teurized under official supervision, and the bacterial count 
should not exceed 50,000 per cubic centimeter when de- 
livered to the consumer. 

"It is recommended that dairies producing Grade B 
milk should be scored, and that the health departments 
or the controlling departments, whatever they may be, 
strive to bring these sources up as rapidly as possible. 

Grade C 

"5. Milk of this class should come from cows free 
from disease, as determined by physical examinations, and 
should include all milk that is produced under conditions 
such that the bacterial count is in excess of 1,000,000 per 
cubic centimeter. 

"All milk of this class should be pasteurized, or heated 
to a higher temperature, and should contain less than 
50,000 bacteria per cubic centimeter when delivered to the 
consumer. 

"6. Whenever any large city or community finds it 
necessary, on account of the length of haul or other pe- 
culiar conditions, to allow the sale of Grade C milk, its 
sale should be surrounded by safeguards such as to insure 



MILK AS A MARKET COMMODITY 41 

the restriction of its use to cooking and manufacturing 

purposes. 

C. E. North, Chairman^ 
Jas. S. Neff, 

October 17, 1917. A. D. Melvin." 

One does not proceed far into the matter of the grad- 
ing of milk before coming to the question of standard- 
ization of fat content. Many cities and states now for- 
bid standardization. In cities where much milk is sold 
by small producers and where there is inadequate inspec- 
tion this practice may be justified, but in cities having 
most of the milk sold by a few large dealers and having 
an adequate inspection force, it would seem that stand- 
ardization is desirable, if each grade i^ plainly labeled. 
Such standardization would permit the dealer to sell milk 
of 2, 3, 4, or 5 per cent fat content, each under its own la- 
bel and each at a different price. The dealer could main- 
tain these fat standards and build up a trade for each. 
This would be of advantage not only to the dealer but to 
the consumer as well, since many consumers prefer milk 
varying in richness from the grade usually sold. It 
would also benefit producers, because the dealer, selling on 
a quality basis, would be willing to pay on a quality basis. 

That grading of milk can be establis^hed in any city was 
the opinion of a committee of the Boston Chamber of Com- 
merce which made a careful study of the matter in 1916.^ 
The committee further states: "The experience of cities 
where grading has been attempted furnishes conclusive 
proof that no city can properly refuse to grade its milk on 
account of the cost."^ Thus far, however, relatively few 

^ Grading and Labelling of Milk and Cream, Boston, 1916, p. 14. 
2 Ibid., p. 14. 



42 THE MARKETING OF WHOLE MILK 

cities have made any provision whatever for grading. 
Grading, of course, imphes labeling in order that the con- 
sumer may know what kind of milk he is buying. 

In those cities in which grading has been established, 
the greater portion of the milk falls into one of the middle 
grades. In New York, for example, a very large proportior 
is Grade B, whereas only a relatively small proportion is 
Grade A milk. The demand for the high grade of milk is 
quite decidedly limited and will probably be still further 
limited as the lower grades are made safe by pasteuriza- 
tion. So long as safety can be assured in that way, the 
average consumer does not care to pay several cents extra 
for a certified or other official grade of milk. 

Section 7. Basis of Payment for Milk 

It is very difficult to compare milk prices paid in differ- 
ent parts of the country because of the fact that for the 
most part the basis of payment is for different units in 
different sections of the country. Although the tendency 
is more and more towards payment by the hundredweight, 
with an allowance for butterfat above or below some 
basic fat content, there is still a wide diversity in the basis 
of payment. 

In 191 5 the Dairy Division of the United States De- 
partment of Agriculture issued the following as being 
among the systems most commonly used: ^ 

"i. By the quart or gallon, 

"2. By the can, the size of the can varying from 8^ to 40 
quarts or more. 

"3. By the can; the can of milk must come up to the standard 
weight. 

"4. By the can or the gallon, with a minimum standard for 

1 Milk Plant Letter 23. 



MILK AS A MARKET COMMODITY 43 

butterfat, with a definite premium per gallon for each one-tenth 
point butterfat above standard. 

"5. By the gallon, the number of gallons being determined 
by dividing the weight by 8.6. 

"6. By weight, which is determined by the number of cans, 
each can being supposed to hold a certain quantity of milk by 
weight. 

"7. By weight, the milk being weighed at receiving station or 
at city plant. 

"8. Same as No. 4, with minimum standard for dairy farm 
score, and premium for extra points in this score. 

"9. A certain price for a pound of butterfat and for 100 
pounds of skimmed milk. 

" 10. Same as No. 9, only the weight of the whole milk is 
considered instead of the skimmed milk. 

"11. On the weight basis, with a minimum standard for 
butterfat and premium for extra points. Sometimes the butter- 
fat standard is established and deductions made for each one- 
tenth point below this standard, as well as premiums for each 
one-tenth point above it. In some cases the premium is paid 
only for milk of three-tenths point or more above the standard, 
while the deductions begin at one-tenth point below. 

"12. A certain price per 100 pounds, depending on the per 
cent of butterfat, allowing 3 cents per one-tenth point butterfat 
above or below the base price for the month for 100 points in 
summer and 4 cents in winter. (Base price for each month is 
from the average per cents of butterfat contained in the milk 
for those months for a period of years.) Milk below 2.8 per cent 
butterfat is paid for on the basis of sweet-cream fat. Deduction 
is made for milk of solids not fat below 8.5 per cent. 

"13. A certain price per point butterfat per gallon." 

In addition to payment for various units, prices are 
quoted at various stages on the way to market. Thus in 
many cases prices are quoted for milk delivered at the 
plant door; in other instances the quotation is for milk 



44 THE MARKETING OF WHOLE MILK 

f. o. b. the city railway station; or again, a price may be 
quoted at the farm gate. Even here, however, one cannot 
be sure as to the prices received by the farmer, for the lat- 
ter may have to pay all or a part of the cost of hauling. 
In many sections prices quoted are for milk delivered, 
at the country bottling plant. Many companies make 
quotations at several different stages to accommodate 
farmers variously located. For example, it is not at all 
uncommon to find a company buying from farmers who 
deliver their own milk at the city plant door and at the 
same time gathering milk from the farms of others, and 
paying them different prices, while in another part of 
its milk territory the same company may be operating a 
country bottling plant and basing its payments on milk 
delivered at that place. 

The Babcock test, since its introduction, has been 
widely adopted as one of the factors in the basic price. 
Perhaps the most usual method is to pay for milk of a 
given richness in fat, say 4 per cent, at so much per hun- 
dredweight. Then for each one-tenth of one per cent of 
butterfat above the basic test, a certain number of cents 
are added and the same number of cents deducted for milk 
testing less than this basic test. In many instances this 
differential has been so low as to be prejudicial to men with 
cows producing milk rich in fat. It would seem that this 
differential should be quite close to the market price of 
butterfat.^ 

^ For a further discussion of this point see Appendix B. 



CHAPTER III 

THE MARKETS FOR WHOLE MILK 

Section i. The City as a Market 

As shown in the first part of Chapter II, only about 14 
per cent of the total amount of milk produced each year 
enters directly into the milk problem, since it is about that 
proportion which is consumed in its fluid form in our large 
urban centers. Most of the remainder is worked up into 
some other form or is utilized directly without becoming 
an article of commerce. It is with the market for this 14 
per cent and with the possibility of shifting the remain- 
ing 86 per cent from one outlet to another as occasion de- 
mands that we are concerned in the present chapter. 

The residents of our cities with almost no exceptions 
use milk in one way or another as an article in the daily 
diet. Nearly every one of these is dependent for his sup- 
ply upon the producers within a limited radius about the 
city. Milwaukee, Wisconsin, and its suburbs in 191 9 
required upwards of five thousand eight-gallon cans of 
fresh milk daily. At present Milwaukee gets the bulk 
of its milk from within a radius of about thirty miles, 
although it occasionally reaches out to upwards of eighty 
miles. Chicago, according to the Health Department's 
estimate, required in 191 6 approximately 265,000 gallons 
daily. Chicago is now obtaining some milk from Fond du 
Lac, Wisconsin, nearly one hundred fifty miles distant, 
but its regular milk zone has a radius of from seventy-five 
to one hundred miles. 

45 



46 THE MARKETING OF WHOLE MILK 

A rapidly growing city usually constitutes a very de- 
sirable market for the farmers in its vicinity, since it is a 
"seller's market" rather than a buyer's, and hence the 
farmer stands in a favorable bargaining position. Some- 
times, however, even nearness to such a city does not help 
in getting the most desirable prices, for much more milk 
may be readily available than even a growing city needs. 
This is true with regard to many cities situated in con- 
densery or other dairy districts. Toledo, Ohio, Detroit, 
Michigan, and Milwaukee, Wisconsin, are all so situated 
as to be able to tap considerable milk reservoirs rather 
easily. 

How much milk may be considered available for a city 
like Milwaukee? In this particular instance between two 
circles, one with a radius of thirty miles, the other with a 
radius of eighty miles, a vast amount of milk is produced, 
little of which reaches the city in fluid form. In 191 6 the 
writer, after a somewhat careful survey, made the estimate 
that if Milwaukee received the milk from all the cheese 
factories then located at convenient shipping points within 
an area with a radius of fifty miles, the city would have 
had at least three times as much milk as it actually needed. 
And how much would it have paid to get it? In normal 
times it would have to pay enough to cover additional 
transportation charges of from five to ten cents a can, plus 
a few cents extra for additional trouble and for compensa- 
tion for the loss of the whey. Such an increase in the price, 
however, would stimulate greatly the production within 
the zone already supplying the city. One of the leading 
dealers of Milwaukee is authority for the statement that 
the city milk zone was no larger in 1916 than it was 
twenty years earlier, although the city had grown at a re- 
markable rate. How such increase in the supply from a 



THE MARKETS FOR WHOLE MILK 



47 



given territory could take place may be seen by a study of 
the map in Figure 2, which shows the Detroit milk zone of 
1 91 5. This zone looks decidedly patchy on the map, that 




Fig. 2. — The Detroit Milk Zone. From U. S. Dept. of Agr. Bui. 639. 

is, the milk seems to come mainly from certain neighbor- 
hoods. Now a somewhat higher price relative to prices 
for other farm produce would doubtless have induced 



48 THE MARKETING OF WHOLE MILK 

many farmers in sections not then producing milk to take 
up its production. That is probably what happened in 
the case of the Milwaukee milk zone. 

Figure 3 shows the Milwaukee zone and that part of 
the Chicago zone which lies in Wisconsin. The solid black 
squares represent milk going to Milwaukee. The solid 
black circles represent milk going to Chicago. It will 
be noticed that the two overlap considerably. For this 
reason prices in the two centers can never for long be 
far apart, since it is always relatively easy for some pro- 
ducers to change from one market to another. It will 
also be noticed that the principal cream shipments come 
from a zone farther from the city. In case the city needs 
more milk, it is always possible to convert some cream 
producers into milk producers, thereby increasing the 
city's fluid milk supply. 

The situation just described for Chicago and Milwaukee 
also obtains for such districts as northeastern Ohio and 
western Pennsylvania, in which are located such cities as 
Cleveland and Pittsburg and the smaller cities of Akron, 
Youngstown, and Warren. Similar situations also obtain 
in the New York milk zone and in the milk zone of any 
other large city which overlaps the milk zones of other cit- 
ies or includes within its own the entire milk zones of 
minor cities. The dealers in smaller cities which are within 
a larger milk zone, as, for example, Elyria in the Cleve- 
land zone and Youngstown in the Pittsburg zone, find 
that in order to keep a supply coming their way they must 
pay nearly as much as the prevailing price in the larger 
center. In November of 191 8 the milk price in Pitts- 
burg was 39^^ cents per gallon. The Federal Milk Com- 
mission for Ohio had established for Youngstown a mini- 
mum price of 34^ cents. The leading Youngstown dealer. 



THE MARKETS FOR WHOLE MILK 



49 




Fig. 3. — The Milwaukee Milk Zone. From Wis. Agr. Exp. Sta. Bui. 285. 



however, at once raised his price to ^^]/2 cents in order to 
get a sufficient milk supply. The same month the price- 
at Ashtabula was ^^ cents per gallon, which proved to 
be too low a price in relation to the Pittsburg price, and 



so THE MARKETING OF WHOLE MILK 

milk began to leave the Ashtabula zone for Pittsburg, 
thus creating a deficit in the supply of the former city. 

The largest milk market in this country is that of New 
York City. In the fall of 1917 the New York City De- 
partment of Health reported that milk was being received 
from 30^934 dairy farms, was collected at 800 shipping 
stations, and supplied the city during the month of No- 
vember with a daily average of 1,627,127 quarts. Of this 
New York State supplied 1,402,277 quarts and Pennsyl- 
vania supplied 114,630 quarts. The balance came from 
New Jersey, Vermont, Connecticut, Massachusetts, and 
Canada. 1 The city is now said to reach out over five hun- 
dred miles in some instances. ^ The bulk of its supply, 
however, comes from about two hundred miles outside 
the city. For several years preceding March, 1919, the 
quotation on which New York milk was purchased was 
that of the one hundred sixty mile zone. In that month 
the producers succeeded in having the basic price quoted 
on the two hundred to two hundred ten mile zone, claim- 
ing that this zone represented more nearly the area from 
which the bulk of the New York supply came. One may 
get a still better idea as to the size of the New York milk 
zone by noting the following figures showing distribution 
of the membership of the New York Dairymen's League 
on March i, 1920.^ 

There are several factors forcing the expansion of a 
milk zone. Most important perhaps is the case of com- 
panies engaged in the distribution of milk reaching out 
for additional or for cheaper milk. Only recently a Colum- 
bus concern, finding that it could not depend upon a suf- 

^ Report of Mayor's Committee on Milk, New York, p. i6. 
* Wilson, C. S., Ohio Farmer, Dec. 6, 1919, p. 698. 
3 Dairymen's League News, March 10, 1920, p. 10. 



THE MARKETS FOR WHOLE MILK 



SI 



Table XIV 

Membership in Dairymen's League 




State 


Leagues 


Members 


Cows 


Connecticut 


17 
4 

49 
774 
225 

18 


828 

177 

2,827 

60,915 

15,076 

995 

80,848 


10,395 
2,072 


Massachusetts 


New Jersey 


1I,78q 


New York. . 


683,691 


Pennsylvania 


119.577 


Vermont 






Total 


1,087 


862,722 



ficiently large and regular supply close at hand, estab- 
lished a milk plant in a rather new section, hoping to build 
up a milk business there to supply its growing wants in the 
city. Very often milk companies make arrangements with 
outlying creameries or cheese factories whereby they agree 
to take the whole output of such creameries or facto- 
ries or such portion of the output as they require, pay- 
ing therefor enough to net the seller a little more than 
what he could get if the milk were made into cheese or but- 
ter. For a number of years prior to 191 6 a Milwaukee con- 
cern had such arrangements with a creamery lying in the 
edge of the Sheboygan cheese district. The milk of this 
company was taken during only a portion of each year. 
In other instances certain concerns in the outer edge of 
the milk zone make arrangements to buy milk from pro- 
ducers and sell it wherever they can get the best price. In 
New York State large numbers of concerns are doing a 
business of that kind, making part of the time cheese or 
butter and at other times selling the cream to ice-cream 
factories and at still other times sending the whole milk 
to New York or to some other city. 



52 THE MARKETING OF WHOLE MILK 

In the neighborhood of condenseries a supply is readily 
available for city use, for as a rule condensery standards 
are nearly if not quite up to the standard of city require- 
ments. Producers supplying milk to condenseries with 
these standards can easily switch over, or, what is more 
likely, the condenseries can change over as need dictates 
and send fluid milk to the city whenever that promises to 
pay better than sale through condensed milk channels. 

The whole movement towards expansion is often facil- 
itated by the fact that men on the outskirts of a zone are 
willing to take up the production of fluid milk for city use 
rather than of milk for cheese factory or creamery with- 
out fully realizing the additional expense necessary to com- 
ply with health department requirements. The average 
city is rather a particular market, as these numerous health 
requirements, already discussed, well show. The produc- 
ers supplying milk to a city often find these regulations de- 
cidedly annoying, as when, for example, they are changed 
frequently, or when untrained and unsympathetic inspec- 
tors go out to enforce them. In most instances, however, 
these new producers are operating on somewhat lower- 
priced lands and hence can frequently produce milk some- 
what more cheaply than can the producers in the older 
sections. 

In the process of expansion of a milk zone more or less 
bitterness often arises between companies and producers, 
since the producers claim that the dealers play one sec- 
tion against another. More particularly the dealers are 
often accused of dropping or threatening to drop a man 
near the city by telling him that they can buy milk cheaper 
in some other section. Thus a man who is operating on ex- 
pensive land and who has perhaps gone to considerable 
expense to equip his place for milk production is forced to 



THE MARKETS FOR WHOLE MILK 53 

accept a lower price than he feels he can afford to take, be- 
cause men farther out from the city have been found 
who can be induced to produce milk at a lower price. 

Producers often assume that inasmuch as they have 
been supplying a city for a number of years, they have ac- 
quired a sort of vested right in the city's market. In 
the summer of 191 8 several instances came to the writer's 
notice in which producers actually requested of the Federal 
Milk Commission for Ohio that it recognize such rights. 
In one instance particularly it was proposed that the lead- 
ing dealer be prohibited from buying cheaper milk out- 
side the regular milk zone for the purpose of distributing 
it in the city and thus lowering the price which the farmers 
could secure. They made the claim that he was actually 
producing a surplus by sending trucks into sections which 
had never before sent milk to the city. The dealer, on 
the other hand, showed that he was merely trying to build 
up a condensing business with the aid of auto trucks and 
claimed that he was benefiting the farmers as a whole, 
particularly those who had formerly had only a poor mar- 
ket for their milk. Naturally the commission refused to 
grant the request of the producers for a monopoly of the 
milk trade of the city, for that is what it would have been. 

Section 2. Alternative Markets 

What are the alternative markets in which a producer 
may sell? For many producers there is no good alterna- 
tive market, — where, for example, in some localities the 
city demand has driven out local cheese factories and 
creameries, leaving the city milk trade as the farmer's 
only market, unless he chooses to make his cream into 
butter or cheese on the farm or possibly to ship the cream 
to a distant creamery or ice-cream factory. Again, a given 



54 THE MARKETING OF WHOLE MILK 

farmer may be on the route of a driver collecting milk 
for a nearby condensery. He cannot afford to haul his 
own milk. The hauler takes the whole load to his particu- 
lar condensery. Now unless the farmer has some other 
equally cheap and convenient way of reaching another 
outlet, he is practically confined to this one market. In 
one of the condensery districts of Ohio, for example, the 
producer has exactly this situation to face. In this par- 
ticular instance the condensery sends wagons around to 
gather the milk from farmers as far as from fifteen to 
twenty miles from the plant. Since many of the pro- 
ducers in this section produce less than a can of milk daily, 
they cannot profitably haul it to town themselves, and 
even if they did, they would have no other adequate mar- 
ket available. Here then they must sell to the condensery 
or choose the alternative of skimming the milk and selling 
the cream to a local or to a centralizer creamery. The 
price paid by the company at its plant in this territory 
in September, 191 8, was $2.10 for 3>^ per cent milk, 
whereas at a plant located on the edge of one of the city 
milk zones of Ohio, the price it paid was ^3.00 for the 
same grade of milk. 

It occasionally happens that a farmer has a choice be- 
tween many markets; thus a man located at a point, let 
us say, between Merton and Pewaukee, Wisconsin, might 
dispose of his milk in any one of a number of different ways. 
He might: 

1. Sell milk to a condensery at Merton. 

2. Ship to a more distant condensery, — Oconomowoc 
or Burlington. 

3. Ship milk to Chicago. 

4. Ship milk to Milwaukee. 

5. Sell milk to a cheese factory. 



THE MARKETS FOR WHOLE MILK 



55 




S6 THE MARKETING OF WHOLE MILK 

6. Sell milk to a creamery. 

7. Ship cream to Chicago. 

8. Ship cream to Milwaukee 

9. Sell cream to some neighboring creamery. 

10. Sell sweet cream to some ice-cream factory. 

11. Make butter at home. 

12. Make cheese at home. 

Few men, of course, have such a wide range of choice; in 
fact, even in the case supposed, some of the markets may 
be promptly ruled out because of the high cost of reaching 
them. Nearly every farmer, however, has several markets 
to which he can turn with no great inconvenience in mak- 
ing the change from one to the other. 

Ordinarily enough men are so located as to make sure 
that prices to be obtained in the leading markets are 
never for long far apart. If, for example, the demand for 
condensed milk were suddenly greatly increased, the price 
for that commodity would go up, and condensery districts 
would be able to outbid nearby city markets, with the 
result that milk formerly going to the latter would go to 
the condenseries and thus force city prices to higher levels. 
This might work itself out through scattered individuals, 
or through the threats of a whole group on a certain route 
to go to the competing market. Exactly such conditions 
frequently obtained during 1916, 1917, and 1918, when 
the condensed milk market was so uncertain that con- 
densers frequently found themselves able to pay very high 
prices at one time, and thus to draw on city supplies, only 
to be confronted by the danger of serious loss at a later 
date, whereupon the reverse movement took place. Con- 
denseries in normal times, it might be said, have difficulty 
in competing with the city milk trade, since their products, 
produced from milk purchased near a large city, must sell 



THE MARKETS FOR WHOLE MILK 57 

on the open market in competition with similar products 
produced where milk can be purchased more cheaply. 
This was illustrated in the Chicago dairy district in the 
spring of 191 6. During a period in which prices are ad- 
justing themselves there may be wide differences in the 
net returns obtainable in the various markets, and the 
alert farmer can materially benefit by selling in the right 
market. The more alert the producers as a whole are to 
relative changes in market demands, as expressed by mar- 
ket prices, the more quickly will prices in the various 
markets become adjusted. 

Although a creamery can seldom outbid a city for the 
milk near the city, it can readily compete farther out. 
Creamery prices are lower than city prices, but they are 
for only a portion of the milk. The farmer has his skim 
milk to consider in addition. Where there is young stock 
to be fed, skim milk has a value variously estimated at 
twenty-five cents to one dollar a hundredweight, which 
thus easily brings the returns to a point where they ap- 
proach or equal those for whole milk. Moreover, cream 
need not be marketed every day, and hence the man who 
sells cream saves a trip to the creamery or milk plant at 
least every second day. In fact, in many parts of the 
country, where the centralizer method predominates, 
cream is often kept a week or more in cool weather. Be- 
cause of the fact that cream can be hauled profitably much 
longer distances than can milk, creameries thrive in more 
sparsely settled communities than do cheese factories 
or condenseries. 

Prices paid by cheese factories are usually somewhat 
higher than those paid by creameries, but, instead of hav- 
ing the skim milk for feed, the farmer gets only the whey, 
which has less feeding value. Moreover, there is the 



58 



THE MARKETING OF WHOLE MILK 



greater expense of daily delivery of the milk and the re- 
turn of the whey. Farmers seldom find it profitable to 
haul farther than from three to five miles to a cheese 
factory, and indeed the latter distance is rather unusual. 




Fig. S- — A Condensery and Its Patrons. Prepared by L. G. Foster for Wis. 
Agr. Exp. Sta. Bui. 285. 

There is scarcely a town of any size that does not have 
one or more ice-cream factories. Such a factory may be 
operated in connection with a city milk plant, a creamery, 
a candy factory, or an ice-cream parlor, or it may be a 
separate plant. Ice-cream factories usually pay somewhat 
higher prices than do creameries. The demand for ice 



THE MARKETS FOR WHOLE MILK 59 

cream fluctuates very widely with weather conditions or 
gala days. Hence the manufacturers cannot contract 
for a regular supply, but must buy large quantities on 
short notice and not infrequently find it necessary to 
cancel orders because of sud3en changes in weather con- 
ditions. Large factories, of course, make some ice cream 
at all times; but, on the whole, the ice-cream factory is 
not so stable a market as the others, and for this reason 
many ice-cream makers now obtain much of their cream 
from various creameries, paying enough to cover addi- 
tional handling and transportation charges and yet leave 
a profit for the creamery at least equal to what it would 
have made by turning the cream into butter. Milk dealers 
and producers for the city market cannot usually profit 
much by the sale of surplus milk to the ice-cream trade for 
the reason that the heaviest demand for ice cream comes at 
the very time when there is a shortage in their own supply. 

Section j. The Export Markets for Milk 

The exports of milk are confined almost entirely to the 
various powdered, condensed, and evaporated milks. 
Prior to the outbreak of the World War milk exports 
played a minor part in the milk business of the country, 
but the unusual demands of the past few years have caused 
the American condensed milk industry to flourish remark- 
ably. 

The principal pre-war markets were the North American 
countries of Canada, Mexico, Cuba, and Panama, whereas 
of recent years the major exports have gone to Europe. 
Pre-war condensed milk exports were distributed as 
follows for two typical years: ^ 

^ The Foreign Commerce and Navigation of the United States, 1912, p. 719; 
Ibid. 1913, p. 585. 



6o THE MARKETING OF WHOLE MILK 

IQI2 I913 

Pounds Pounds 

Europe 1,204,317 11,699 

North America 10,365,580 9,865,563 

South America S31.314 596,449 

Asia 4.9SS.635 4,147,284 

Oceana 3»o73»990 1,366,384 

Africa Sii»902 538.579 



Total amount, pounds 20,642,738 16,525,918 

Value ^1,651,879 $1,432,848 

Beginning with 1913 the exports increased at a phenome- 
nal rate year by year, as is shown by the following figures: 

Pounds 

1913 16,525,918 

1914 22,83 1»904 

191S 75,689,584 

1916 219,444,018 

1917 428,575,213 

1918 551.139,754 

1919 852,181,414 

The largest single foreign customer in 19 19 was the 
United Kingdom, which took over 420,000,000 pounds. 
It is noteworthy that although there were such tremen- 
dous gains in the business as a whole, the markets nearest 
home — the North American trade — increased their demand 
but little. Only about 11,000,000 pounds went to these 
markets in 191 9 as compared to about 10,000,000 in 191 2 
and in 1913. The South American trade appears to have 
been even more neglected, since it is not mentioned at 
all in the commerce reports except as included in the 
"other countries." ^ Following is the list of countries to 

^ Monthly Summary of Foreign Commerce of the United States, Dec, 1919, 
P- 51- 



THE MARKETS FOR WHOLE MILK 6i 

which condensed milk was exported in 191 9, together with 
the amount exported to each: ^ 

Pounds 

Belgium 61,596,636 

France -.114,818,165 

Netherlands 1 1,821,267 

United Kingdom 420,928,450 

Canada 4,578,983 

Panama 3j599>S64 

Mexico 2,946,455 

Cuba 33.461,993 

China 5.555,679 

British India 10,130,675 

Straits Settlements 6,444,295 

Hongkong 2,269,288 

Japan 4,123,127 

Philippine Islands 14,085,937 

British South Africa 1,025,731 

Other countries 154,795,169 

^Monthly Summary of Foreign Commerce of the United States, Dec. 1919, 
p. SI 



CHAPTER IV 

DISTRIBUTION OF MILK 

Section i. Collection of Milk from the Farmers 

The collection of milk from the farmers may be con- 
sidered under two heads, the direct method and the in- 
direct method. In the case of the direct method the milk 
is brought right from the farms to the city milk plants. 
In the smaller centers the more common way is for each 
producer to bring his own milk to the plant or perhaps 
for two or three producers to cooperate by taking turns 
at hauling. This method often results in a great amount 
of unnecessary duplication. Jennings ^ cites an instance 
where fifty men and wagons using sixty horses were em- 
ployed to bring to a central plant milk which could have 
been delivered by twelve men and wagons with twenty- 
four horses. Not only would cooperative delivery or 
delivery by a single trucker have saved the time of a con- 
siderable number of men and horses, but the unloading 
at the plant would have been facilitated, since one large 
load may be unloaded much more rapidly than many 
small ones. As a result of these possible economies, the 
tendency is more and more to have the milk brought in 
by men who make a business of hauling. Where an indi- 
vidual farmer will haul three or four cans, such a hauler 
will haul from twenty to fifty ten-gallon cans, and an auto 
truck will often double or treble that quantity. In some 

1 Jennings, I. G., A Study of the New York City Milk Problem, p. 17. 

62 



DISTRIBUTION OF MILK 63 

sections the producers themselves are beginning to insist 
that all the milk be taken to the plants by such route men, 
in order (i) that there may be less delay at the plant, 
and (2) that the milk may be more cheaply hauled be- 
cause collected in larger quantities without extra travel. ^ 

Even in the larger centers, large proportions of the milk 
are frequently brought in by wagon or truck. In the 
summer of 1916 over ^6 per cent of Milwaukee's milk sup- 
ply was being brought in in this way. 

In many instances the trucks used for hauling are oper- 
ated by the milk companies themselves, in order to assure 
a steadier supply of milk. In other instances the drivers 
are hired by the companies and all or a part of their pay 
is deducted from the farmer's milk check at the end of 
each pay period. Recently, however, numerous instances 
have been reported in which producers themselves have 
owned and operated motor trucks. Several such are to 
be found in the neighborhood of Baltimore, Maryland, 
where cooperative companies have been organized for this 
purpose.^ Most commonly, however, the milk haulers, 
whether operating by team or by motor truck, are more 
or less independent of either producers or company. They 
operate for a given charge per can, which charge varies 
rather widely from community to community, depending 
upon the amount of milk hauled regularly, the kind of 
roads, and the distance hauled. 

As cities are compelled to reach out farther for milk, 
larger and larger proportions of the direct shipments are 
brought in by steam or interurban lines. Though the 
development of milk carrying by electric railroads is com- 

^ Dairymen's Price Reporter, Jan. 5, 1920, p. 2. 

2 U. S. Farmers' Bulletin 1032 ; Bulletin No. i, Firestone Ship by Truck 
Bureau, Akron, Ohio. 



64 THE MARKETING OF WHOLE MILK 

paratively recent, it has reached considerable proportions 
in some of the cities, especially in those of medium size. 
In the larger cities a great proportion is brought in by 
steam road. 

By the indirect method milk passes through a country 
cooling station, pasteurizing plant, or pasteurizing and 
bottling plant before going by railroad or truck to the city. 
Often such country plants are merely cooling stations for 
properly chilling the milk before it is brought to the city 
for the pasteurizing and bottling processes. In many 
other instances, however, the country plants are fully 
equipped for pasteurizing and frequently for bottling as 
well. Both Chicago and New York receive large quan- 
tities of milk daily which have been pasteurized and bot- 
tled at country plants. 

It may seem like unnecessary expense to have milk 
handled at country plants when a certain amount of milk 
plant accommodation is still necessary in the city. The 
principal reason for having such plants is thus stated by 
Parker: ^ "The chief reason for maintenance of country 
milk plants is found in the vital principle of the North 
system, namely, that a single central plant is needed in 
the dairy district to collect, pasteurize, standardize, and 
store the milk and to clean and sterilize the tinware used 
by the farmers, it being unreasonable to expect them to do 
this work because they have not the training for it and 
because of the unnecessary expense that would be incurred 
should each farmer invest in the requisite apparatus and 
expend time and labor in preparing his milk for market 
that can be greatly economized by handling the milk of 
all the farmers together. In fine, better milk is obtained 
through the country milk plant system than under that 

1 Parker, H. N., City Milk Supply, p. 238. 



WHOLESALE MILK ROUTES SUPPLYING MILWAUKEE 




DISTANCE COVERED WHILE COLLCCTINS FROW FARMS 
,. — DISTANCE TRAVELLED WITH FULL LOAD 



Fig. 6. — Wholesale Milk Routes Supplying Milwaukee, 1916. From Wis. 
Agr. Exp. Sta. Bui. 285. 



66 THE MARKETING OF WHOLE MILK 

of city plants. In some cities like Chicago with the dairy 
districts at their very gates, the city plants have largely 
disappeared; practically all of the milk being shipped in 
bottles from the country to the city." 

The limitations of the country milk plant are thus 
described by the Wicks Committee in its report on the 
New York district in 1916:^ "The auditor's report made 
to this committee from the books and records of certain 
distributors established the proposition that market milk 
can be handled, clarified, pasteurized, and bottled at 
the country station at a lower cost than the same work 
can be done in the city plant. On the other hand, the 
milk distributor asserts that the business of the large dis- 
tributing companies cannot be successfully handled 
through the operation of a large number of small country 
plants. They contend that the operation of two or three 
country plants, where a less cost of pasteurization, etc., 
is shown, does not afford a just basis of comparison as to 
what the costs would be if all the business of the large 
companies was attempted to be handled in that way. The 
testimony of the larger distributors is to the effect that it 
would be impractical and impossible to carry on their 
business satisfactorily by buying their daily supply through 
out the year from a great number of cooperative plants 
managed and conducted by the dairymen, because of the 
fluctuating and varying needs of the business and the un- 
certainty of the supply at different seasons from various 
country stations so controlled. In other words, their 
contention is that if all the milk now handled at the cen- 
tral city plants was attempted to be handled by them 
in their own plants at the shipping point, it would require 

^ Preliminary Report of Joint Legislative Committee on Dairy Products^ Live- 
stock and Poultry, p. 599. 



DISTRIBUTION OF MILK (^y 

great duplication of apparatus and labor at many points. 
At some seasons, this apparatus and labor would be idle; 
at others it would be over-burdened; and that in consider- 
ing the entire volume of business, it is far more econom- 
ical to gather the milk at the central city plant in the 
required amounts and prepare it for market as a whole 
for a day's supply, instead of attempting to accumulate 
or prepare from many various sections." 

In many sections there is a strong movement for the 
ownership of these plants by the producers themselves, 
so as to make them more independent of the city dealers. 
This is being urged in the Boston district ^ and in the New 
York district, where some country milk plants are now 
owned and operated by producers and where an elaborate 
plan is under way for the ownership of a considerable 
number of them. On the Pacific coast the dairymen are 
in numerous instances erecting so-called utility plants, 
which are really country plants equipped to care for the 
surplus in whatever way necessary when not all the milk 
is needed in the city. The cooperative ownership and 
operation of country plants will be further considered in 
Chapter V. 

In many instances considerable quantities of milk are 
collected for the city supply by country creameries, cheese 
factories, and condenseries, which are so equipped as to 
be able to prepare milk for city use and whose contracts 
are such that milk can be diverted to the city as occasion 
demands and at other times worked up into one of the 
numerous milk products. At the outer edge of the milk 
zone of practically every large city may be found such 
establishments. One hindrance to such arrangements 
as this, however, is the fact that in many cities the board 

^ New England Dairyman, Aug., 1917, p. i. 



68 THE MARKETING OF WHOLE MILK 

of health requires that all farms producing milk for a plant 
must be inspected before the milk of that plant can enter 
the city. This is a safeguard for the consumers, and it is 
certainly only fair to those producers who have gone to 
the extra trouble and expense of complying with city 
regulations to require that men outside the regular zone 
also comply with these regulations before being allowed 
to send milk to the city. 

Section 2. Railway Transportation of Milk 

As railroad transportation of milk to a large city be- 
comes necessary, a few cans are picked up at stations along 
the line and hauled as baggage. As the milk business in- 
creases along such a line, however, the space allotted to 
milk becomes insufficient, and a special car is necessary. 
Still later, when enough milk comes to be shipped from 
certain stations to fill or nearly fill a car at a single station, 
cars are set out at such places to be picked up by the morn- 
ing train, and, if not entirely filled, they are filled at the 
next two or three stations, where lesser supplies of milk 
have usually accumulated on large platforms and are 
quickly transferred to the car by farmers and railroad 
employees. Fully 25 per cent of the New York milk sup- 
ply originates at points where entire car lots are thus 
started.^ As the milk business increases still further, so- 
called special trains run into the city. In 191 6 twenty-one 
such trains, composed of from eight to twenty-five cars 
each and running from 49 to 295 miles without a stop 
except for orders, etc., were serving'New York City. 

Refrigeration is usually furnished by the carriers for 
the less than car lot shipments, which in most instances 

^ InUTState Commerce Commission Docket No. 8558, Brief for N. Y. Sanitary 
Dealers, p. yj (19 16). 



DISTRIBUTION OF MILK 69 

constitute by far the greater proportion of the milk supply, 
whereas in the case of the carlot shipments originating 
at country plants it is more usual for the milk company 
to do its own icing. Though in many instances refriger- 
ator cars are used, the more general practice is to use 
ordinary baggage cars for the pick-up service. 

Up to 1 91 7 the railroad companies in many of the dairy 
sections commonly leased cars to the large milk companies. 
This practice, however, gave some of the large companies 
an undue advantage, as was shown by the investigation 
of the Boston Chamber of Commerce in 191 5, which pro- 
duced evidence that in most sections supplying Boston 
with milk there was no competition, owing to the fact that 
one company would run a leased car along a given rail- 
road, thus practically limiting the producer's market to 
the plant of a single dealer, since the producer could not 
afford to ship elsewhere at the higher rates charged for 
less than carlo ts.^ A case brought before the Interstate 
Commerce Commission resulted in the abolition of the 
leased car system October i, 1 916.2 ^^^^ 

Around all of the larger cities where the milk belt lies 
a considerable distance outside the city, concentric circles 
have been drawn about the city dividing off so-called milk 
zones. One circle may have a radius of sixty miles, the 
next a radius of eighty miles, and the next a radius of one 
hundred miles. All milk coming from between the sixty 
and the eighty mile circles would then take the same trans- 
portation rate, whereas milk coming from between the 
eighty mile and the one hundred mile circles would all take 

^ Investigation and Analysis of the Production, Transportation, Inspection and 
Distribution of Milk and Cream, by Boston Chamber of Commerce, July, 1915. 

^ N. H. College Extension Bulletin, No. 8, p. 17, A Survey of the Dairy Mar- 
keting Conditions and Methods in New Hampshire. 



70 THE MARKETING OF WHOLE MILK 

a somewhat higher rate. Such zones have been estabhshed 
around Boston, Philadelphia, New York, and other east- 
ern cities. Chicago, however, has no such zone rate. For 
larger cities the zone system is usually considered desir- 
able, since it facilitates the establishment of milk price 
quotations. 

Section j. The Middleman Function 

One can scarcely pick up a paper or magazine without 
finding therein a tirade against the middleman wherein 
the language varies from moderate criticism to such de- 
nunciatory adjectives as "unscrupulous," "greedy," 
"preying," "robbing." One might well gain the impres- 
sion widely prevalent that the middleman is at best an 
unnecessary evil; that he places himself at the gate through 
which the necessaries of life must pass on their way from 
producer to consumer and lets nothing go by without tak- 
ing his toll. As a matter of fact, however, the middleman 
performs a function which is as needful and which is as 
truly a service as production itself. Indeed he does actu- 
ally produce when he adds value to a commodity by plac- 
ing it at the consumer's door at the moment when wanted 
and in the quantity desired. This, being true of commodi- 
ties in general, is all the more true of milk, a perishable 
commodity which must for the most part be consumed 
within forty-eight hours from the time that it is produced. 
Some few persons can, of course, obtain their milk directly 
from the producer. This is done to a small extent in every 
town. Perhaps an occasional consumer with no pressing 
duties gets his daily supply from a neighbor after the milk- 
ing hour, or perhaps a farmer on his way to a condensery 
or creamery leaves a can or a bottle of milk at a few homes 
in the city, or possibly, as in the case is most small towns, 



DISTRIBUTION OF MILK 71 

a nearby farmer makes it a business to peddle milk to 
some of the residents of the town. But in our cities there 
must be for most consumers some sort of a middleman. 
There are two main methods of distributing milk, 
direct and indirect. In the direct method the producer 
himself or his hired employee delivers the milk to the con- 
sumer, or the consumer himself gets it from the producer 
as described in the preceding paragraph. In the indirect 
method the producer sells the milk in bulk or even oc- 
casionally bottled to a middleman, who puts it through 
the various necessary processes on its way to the consumer. 
It is relatively seldom that a second or a third middleman 
enters, though often this does occur in the larger cities. 
For example, for many years a firm in Chicago did a large 
business in placing farmers' milk and in making collec- 
tions therefor. More recently many producers' associa- 
tions have undertaken this function in various cities, thus 
assuring their members of a more certain market and at 
the same time making substantial gains through better 
selling and closer collections. In every city there is more 
or less dealing in milk between dealers, — a so-called hori- 
zontal movement, which is only a method of equalizing 
supplies so that dealers temporarily short can get a supply 
from dealers temporarily long on milk. In the main, how- 
ever, there is only one middleman. The larger any given 
city grows, the greater comes to be the distance between 
the consumer and the producer, and the more necessary 
does it become that there be an efficient middleman to 
take the milk of producers, bring it to the city, and dis- 
tribute it. Only a small fraction of the producers about 
many of our large cities could to-day deliver their own 
milk to the consumer, and most of those could do so only 
at a much greater expense than it is now being done. 



72 THE MARKETING OF WHOLE MILK 

In a village or small town, the milk is often delivered 
before it is more than one or two hours old, being deliv- 
ered twice a day. If only a morning delivery is made, 
evening's milk is then about twelve to eighteen hours old 
at time of delivery, but in most cases of indirect market- 
ing, the evening's milk is at best about thirty-four to forty 
hours old and the morning's milk at least twenty-two to 
twenty-eight hours old at the time of delivery. 

In nearly every city a considerable quantity of milk is 
marketed through the stores. In Eau Claire, Wisconsin, 
where a careful survey was made of the stores in 191 6, 36 
per cent of the city's milk was found to be sold in this way. 
In Columbus, Ohio, in 191 9, about ^^ per cent was handled 
by the stores. In New York City the same year about 
5 per cent was sold through the stores bottled, and about 
30 per cent was sold through stores "loose," that is, in 
bulk, dipped into any vessel the consumer might happen 
to bring to the store. ^ 

Practically every writer on the milk problem refers to 
the fact that with our present competitive system of dis- 
tributing milk, there is an unnecessarily large amount of 
duplication. Not only are there often more men engaged 
in the business of delivering milk than are necessary, but 
each has more machinery and general equipment than he 
needs in handling his business, that is, each could usually 
handle more business without an increase in his fixed 
investment. Moreover, almost without exception the 
dealers are charged with gross inefficiency. A personal 
acquaintance with any of the accused dealers, however, 
reveals the fact that they measure up very favorably with 
other men of big business, which leads one to wonder if, 

^ Report of Fair Price Committee of the City of New York, 1919, Legislative 
Document, No. 29, p. 46. 



DISTRIBUTION OF MILK 73 

after all, there is not another side to the mooted question, 
and whether the constant effort to reduce costs in order 
to increase profits does not in large measure offset the 
apparent wastes of competition. 

Section 4. Direct Marketing 

In our smaller cities and towns practically all milk is 
retailed by the producers themselves. The same practice 
is followed to some extent even in the larger cities. In 
Columbus, Ohio, for example, ^ perhaps 5 or 10 percent of 
the milk is still brought in by producers. No hard and 
fast line can be drawn, however, between direct and in- 
direct marketing, since almost every producer who dis- 
tributes his own product finds at certain seasons that he 
cannot supply the demand without buying additional 
milk from a creamery, a milk plant, or from neighboring 
producers. In the main, however, the division is fairly 
clear. 

On the outskirts of a town one often finds a producer 
with one or several cows who delivers on foot to neighbors, 
or a city dealer may have one or more cows from which 
milk is delivered to neighbors in the immediate vicinity, 
often by a boy or girl, who does the work before going to 
school. In some instances milk is delivered by producers 
on their way to a creamery or cheese factory. In other 
instances the consumers themselves go for the milk, some 
going in the morning, others at night, or perhaps some 
going both morning and night. When the consumer calls 
for the milk, the price is usually a cent or two cheaper than 
if the milk is delivered. 

The methods of delivery in direct marketing vary from 
delivery on foot or with a small express wagon, as fre- 

1 A city of about 225,000 population. 



74 THE MARKETING OF WHOLE MILK 

quently seen in villages, to delivery by covered wagon 
or motor truck. Where the producer lives some little dis- 
tance out from the city, use is ordinarily made of a de- 
livery wagon of some sort drawn by one or two horses. 
Occasionally one finds an auto truck or a touring car in 
use for this purpose. The auto truck has been found 
particularly useful by men living farther out or men sup- 
plying a special grade of milk, which must be disposed 
of to customers scattered all over the city. There is as a 
rule but one delivery outfit, and that is most frequently 
operated by the owner himself. 

Equipment for direct marketing varies from a few milk 
cans, a strainer, and a dipper in the producer's kitchen 
to an elaborately equipped milk house such as one often 
finds in the case of men producing special grades of milk. 
Most commonly, however, there is some sort of milk house 
near the well, containing a bottler, perhaps a bottle washer, 
a supply of bottles arid bottle cases, and often a cream 
separator for skimming surplus milk. An ice house is 
usually felt to be a necessity, inasmuch as a regular supply 
of ice is not likely to be available from other sources. 

The methods of handling milk in preparation for mar- 
keting are also simple. Where the practice is to sell milk 
unbottled by dipping from the can, the milk is merely 
strained into cans, which are placed in cold water to cool, 
or it may be strained, passed over a cooler, and then put 
into cans for delivery. In most communities at the present 
time the greater proportion of the milk is sold in bottles. 
In this case it is strained, cooled — either by being put 
into cans set in cold water or by being passed over a 
cooler, — and then bottled. The bottles are then iced for 
delivery. 

The surplus and shortage problem is seldom a serious 



DISTRIBUTION OF MILK 75 

one to the man marketing directly. A small amount of 
extra milk is obtainable from a neighbor, if city regula- 
tions are not too stringent to allow of this practice, or 
milk can be obtained from some other milk man or from 
a creamery. A surplus can usually be disposed of at the 
same creamery, or it can be skimmed and fed to young 
stock, in which case the cream is sold bottled to customers 
or in bulk to a creamery or ice-cream factory, or is made 
into butter on the farm. 

Under direct marketing the milk peddler is faced with 
certain difficult problems. In the first place, the pro- 
ducer peddling his own milk spends much of his time in 
town, thus neglecting during that period his farm work 
or intrusting it to hired help. On the other hand, if he 
attends to the farm work himself and intrusts the milk 
route to hired help, he has the difficulty of preventing 
fraud or dishonesty, and of keepir^ customers satisfied 
and having the work efficiently performed. 

Around our large cities direct marketing is being forced 
out because the length of the drive to the city becomes too 
great to be made regularly with a small load. The dairy- 
man cannot afford to erect the kind of buildings required 
by health regulations on high-priced land which is likely 
to be needed for factories or homes in the immediate future. 
If he goes out to cheaper land, however, he is likely to be 
five or six miles or more from the city, in which case he can 
hardly afford to take the daily trip to peddle his own milk, 
unless he is a producer of "special" milk. Around a city 
like Milwaukee there are very few dairymen within five 
or six miles of the city proper. 

The producer of special milk would seem at first glance 
to have some advantage in selling by the direct method, 
since he can get a somewhat higher price. After he has 



76 THE MARKETING OF WHOLE MILK 

worked hard to build up a trade, however, he usually finds 
that he has difficulty in holding it, first, because it is 
not an easy matter to get help which will care for milk 
equipment and do the milking in such a way as to keep a 
uniformly high standard of quality regularly, and, second, 
once the demand for a high-grade milk has been estab- 
lished, it is always relatively easy for a competitor with 
milk claimed to be "just as good" and offered at a few 
cents less to attract some of the customers, thus dividing 
up the business and perhaps making the route unprofit- 
able. This is particularly true because the demand for 
a high-grade milk is limited. 

It is sometimes suggested by writers in our daily papers 
and elsewhere that we go back to the direct method of 
distribution. Even though it were possible to produce 
sufficient milk within a reasonable driving distance, such 
a change in a city like Columbus, for example, would mean 
more expensive rather than cheaper milk, since it would 
bring about the extreme of duplication. At present we 
have several dealers each with the city nicely parceled off 
so that his delivery-men have certain small areas to cover. 
Under direct distribution we should have each of many 
producers seeking customers wherever he could find 
them, driving over long routes and frequently crossing 
the routes of other producers. Since producers distribut- 
ing their own milk usually sell at the same price at which 
other dealers sell, one would think that if they were mak- 
ing a large profit, more farmers would take up the market- 
ing by that method. As a matter of fact, however, the 
number has been gradually decreasing. 

That it is possible, however, for an individual to enter 
the business and maintain a trade even under adverse 
conditions is shown by the fact that a few men are always 



DISTRIBUTION OF MILK ^^ 

found successfully distributing their own milk. A pro- 
ducer wishing to do this usually starts business by cutting 
prices during the summer months when prices are low. 
At first he may have to sell to scattered customers. By 
having a high grade of fresh milk at a somewhat lower 
price than his competitors, he can usually retail all he has. 
If there is a surplus, this can ordinarily be sold to stores. 
As soon as his trade is firmly established, he increases his 
price nearly or quite to that of his competitors. The next 
step is to try to consolidate the route by dropping here 
and there an outlying customer and picking up more in a 
solid district, thus eliminating the long drives, particularly 
during seasons of shortage. Building up a route by this 
method is certain to cause large competitors considerable 
annoyance, to say the least, and the fact that it can be 
done and is being done is a practical guarantee against 
monopoly prices in our smaller towns and even in cities 
of considerable size, although of course not in our larger 
cities, since there are not enough farmers producing milk 
within driving distance of the latter to afford a serious 
hindrance to monopoly. 

Section 5. Indirect Marketing 

In most of our cities of any size, the indirect method of 
marketing prevails. In Milwaukee perhaps 97 per cent 
of the fluid milk supply was thus marketed in 191 6. In 
the larger cities of Ohio 85 to 95 per cent falls into this 
class. In the smaller cities, those of from fifteen to thirty 
thousand, the percentage usually varies from 25 to 75 
per cent. In our very large cities the direct method of 
marketing is practically unknown. 

With the rise of the indirect method of marketing, the 
relations between producer and dealer become compli- 



78 THE MARKETING OF WHOLE MILK 

cated and require frequent adjustment. The most usual 
contractual relation between producer and dealer is one 
which provides that the dealer is to take all of the milk 
produced during a given period of time. Prior to the 
present unsettled conditions arising out of the war the 
most usual contract period was for six months. Commonly 
one six months' period included the winter months and 
the other six months' period the summer months. During 
the past two or three years, however, neither producers 
nor dealers have as a rule been willing to contract for 
longer periods than one or two months at a time. Though 
there are often no definite contracts, the large dealers 
usually ask their patrons to sign agreements going some- 
what into detail as to number of cows supplying the milk 
purchased, method of handling milk, method and con- 
dition of delivery, and prices. Recently in many cases 
contractual relations have been established between pro- 
ducers and a selling agency of their own, which in turn 
contracts with the city dealer. This development will 
be further discussed in the chapter on Cooperation. 

The financial relations between farmers and dealers 
have been the cause of frequent contention. Payments 
are usually made once or twice each month, more fre- 
quently the latter, although in the case of many of the 
large plants, payments are made but once each month. 
With many of the latter there is a tendency to postpone 
payment long enough after the half month or month has 
elapsed to allow for the making up of all the statements 
of the numerous patrons. Consequently many of these 
concerns do not pay until two or three weeks after the last 
delivery has been made under a given pay period. One 
such company, for example, pays on the twentieth of the 
following month. The claim is made that were payments 



DISTRIBUTION OF MILK 79 

to be expedited to the extent of settling within a few days 
after the close of the pay period, it would mean a tremen- 
duous expense for extra clerical help, which would ulti- 
mately have to come out of the price paid to the producer. 

The financial standing of the dealer is a question of 
considerable concern to the farmer. Attempts have been 
made to protect the producer through laws requiring that 
dealers be bonded. New York at present has such a law, 
as have also several of the New England states. In many 
sections producers' associations have taken up this func- 
tion and are placing on the blacklist dealers who are slow 
pay, so that in some instances such dealers have had to 
pay a few cents extra in order to get milk at all. Dealers 
who are financially weak have frequently been known to 
fall farther and farther behind in their payments, ulti- 
mately going into bankruptcy owing the producers for 
two or three months' milk. Small dealers in many of our 
cities have been especially troublesome in this way. A 
good part of this difficulty would be obviated if farmers 
were more generally to make use of the various commer- 
cial credit rating agencies when they do not have an agency 
of their own. 

In some sections of the country the dealers own the milk 
cans. This has been particularly the case in the New 
England states, where it has been said that "if three 
great milk companies . . . should withdraw their cans 
from the milk service, thousands of tons of milk would 
perish in the country, while hundreds of people in the 
city would be going without. . , . The dealers might 
almost as well own the cars." ^ Such an arrangement is 
usually unsatisfactory and expensive. Aside from the 

1 Pattee, Richard, Circular /p, Massachusetts State Board of Agriculture 
(1918), p. 8. 



8o 



THE MARKETING OF WHOLE MILK 



dependence of the producers, the dealers' cans are not 
given proper care while in the hands of the farmers. This 
means unduly rapid depreciation of the cans, with con- 
sequent increased expenses. In numerous sections of 
New England at the present time a can charge is regu- 
larly made by some of the larger companies. ^ 

With the development of the indirect method of market- 
ing, we have the entrance of an intermediary, — the middle- 
man. He may be a very small dealer, one man buying the 
milk from two or three farmers, doing all his own bottle 
washing, filling, etc., delivering in the morning and doing 
the bottling and other work later. Most of the small 
dealers of our cities operate but one route each. They 
frequently have an extra boy or man to help about the 
bottling plant. Varying from this small dealer are other 
dealers with larger and larger businesses, until we reach 
the very large concerns, operating hundreds of wagons. 
In Milwaukee in 191 6 there were 77 dealers operating 
routes as shown in the following table: 

Table XV 



Table Showing Number of Routes Operated by 77 Milwaukee Milk Dealers, April, 

IQ16 


No. of routes 


No. of dealers 


Total no. of 
routes in group 


I to 10 


71 

.3 

3 

77 


152 

SO 

238 


II to 20 


Over 20 


All dealers 


440 





In the spring of 1920 the number of dealers had been re- 
duced to about thirty-five. The largest of these was oper- 

^ Pattee, Richard, Circular /p, Massachusetts State Board of Agriculture 
(1918), p. 9. 



DISTRIBUTION OF MILK 8i 

ating 242 routes and was supplying milk to about 55 per 
cent of the families of the city, and the two dealers next 
in size were operating about forty routes each. 

Once the milk business has reached the stage where 
such large quantities are distributed by a few dealers, a 
high degree of systematization is necessary to conduct 
the distribution efficiently. Milk arrives at the plant in 
large volume at a certain hour of the day and must be 
processed and entirely out of the way before the next day's 
supply is due. It must also be ready for delivery each day 
at a certain time, for there is no reserve of bottled milk to 
fall back upon in case the new supply is held up at any 
stage. The whole distributive organization must work 
in unison if the distribution is to be made with efficiency 
and dispatch. That this is true becomes apparent when 
one considers the distribution from the point of view of 
what each of the various operations implies. 

The receiving of the milk at the plant door, simple as 
that may seem, requires system in order that the hundreds 
or in many cases thousands of cans can be received, ex- 
amined or sampled, and weighed in the course of a few 
hours each morning. Then there is the matter of keeping 
straight the records of a great number of individual pro- 
ducers, which records must show each individual's tests 
and weights. Every mistake means complaints and the 
possibility of accusations of dishonesty and other mis- 
understandings. 

Putting the milk through the various stages is alone 
an elaborate process. In a small plant the system of han- 
dling may consist of a few simple steps. They may be: 
(i) weighing the milk, if it is purchased by weight; (2) 
straining into the filler supply can; (3) bottling; (4) cap- 
ping by hand; (5) transferring bottles to wagon ready 



82 THE MARKETING OF WHOLE MILK; 

for delivery, or, if delivery is made the following morning, 
transferring to a refrigerator; and (6) delivery; or the 
milk may pass from the weigh can to a pasteurizer supply 
can, thence to a pasteurizer and to a cooler before being 
bottled. 

In big city plants the whole process is more complex 
and is usually accomplished by larger and more efficient 
machinery. Here the milk is received in a special receiv- 
ing room, where it is inspected. It is then strained into a 
weigh can, weighed, and, when purchased by test, sampled 
for further testing. From the weigh can it is often pumped 
to the upper floor of the plant into a supply tank, in order 
that gravity may be used in all further transfers. From 
the supply tank it passes to the pasteurizer. Three sys- 
tems of pasteurization are in common use. (i) The flash 
system is perhaps the most frequently used. Under this 
system the milk is heated from 145 to 160 degrees Fahren- 
heit for an instant and then passed over cooling pipes. 
(2) The holding system requires that the milk be heated 
to about 145 degrees, usually by means of the pasteurizer 
employed in the flash system. In contrast to the flash 
system, the milk, instead of being cooled at once, is held 
at 145 degrees for thirty minutes. This system is perhaps 
the best in common use. Apparatus has been devised 
which automatically holds milk for the required time in 
such a way that although it enters and leaves the pasteu- 
rizer in a steady stream, successive compartments are 
filled and then emptied after their contents have been 
heated and held the required time. Pasteurizing at 145 
degrees and holding for thirty minutes does not appreci- 
ably change the chemical composition of the milk, nor 
does it injure the cream line. The Chicago Board of 
Health, as well as the boards of health in many other 



DISTRIBUTION OF MILK 83 

cities, requires the use of such a system. (3) The third 
system is that in which the milk is heated in a vat and held 
the required time. After being pasteurized and cooled, 
it passes to a tank supplying the bottler. A fourth system, 
pasteurization in the final container, is generally considered 
too expensive a process for present market demands, al- 
though it has been shown to be the most desirable method 
on account of its effectiveness, since no contamination is 
possible after pasteurization. 

In the larger city plants there are usually several bot- 
tling machines into which cases of empty bottles are fed 
at one end and the cases of filled and capped bottles re- 
moved at the other end. The cases of bottles are then 
stacked up in the refrigerator ready to be taken out for 
delivery the following morning. So efficient are some of 
these plants that a given quart of milk passes from receiv- 
ing room to refrigerator in something like forty minutes, 
even with the use of the holding system. 

In the country bottling plants, the process is similar 
to the above, except that the filled cases are stacked up 
and thoroughly iced in a refrigerator freight car ready for 
shipment to the city in time to arrive there by early morn- 
ing, when delivery-men begin to load their wagons. 

Keeping check on several hundred delivery-men is an- 
other problem in a large company, since the method must 
be such as to protect the company's interests as well as to 
insure proper treatment of the consumer and to keep the 
good will of the driver. Still another problem which any 
large concern must meet is that of getting its bottles re- 
turned, for a lost bottle, costing four or five cents, means 
the profit on ten to twenty quarts of milk at least. Then 
there is also the question of keeping up collections on hun- 
dreds of small accounts with consumers and on the larger 



84 THE MARKETING OF WHOLE MILK 

accounts with wholesale customers. This phase will be 
considered somewhat more in detail in a later section. 

In the milk business there has been a pronounced tend- 
ency towards centralization. From every part of the 
country reports indicate that in the past decade there has 
been a very great decrease in the number of men distrib- 
uting milk, in spite of the fact that the cities have been 
growing and that the milk business as a whole has been 
increasing fully as rapidly as has the population. Thus in 
New Haven, Connecticut, which in 1903 had a population 
of 108,027, there were about two hundred milk routes. 
In 1 916, with an estimated population of 170,000, there 
were only one hundred sixty routes, — that is, an increase 
of 57 per cent in the population was being served by 20 
per cent fewer wagons.^ In many instances a reduction 
in number of routes has taken place as a result of a drop- 
ping out of some of the smaller dealers and of the absorp- 
tion of some of the larger ones by still larger companies, 
or by a combination of several of the leading companies. 
These combinations have almost invariably been ac- 
companied by decreased operating expenses or at any rate 
by decreased duplication in the delivering. A typical 
example is that of Springfield, Ohio, where in 191 8 the 
two largest companies, each operating eighteen routes, 
combined. Within six months after combining, the num- 
ber of routes had been reduced from thirty-six to thirty, 
although the amount of business in that time had actually 
increased. Similar instances might be given for other 
cities. 

The question then arises, can the small dealer withstand 
the competition? If so, how does he do it? In the first 

1 Weld, L. D. H., Marketing, City of New Haven, 1916, p. 37; Alvord, H. C, 
Milk Supply of Two Hundred Cities and Towns, p. 54, 1903. 



DISTRIBUTION OF MILK 85 

place, he works long hours. This was almost universally 
true in Milwaukee in 191 6. It is true in Columbus and 
in other Ohio cities now. The small dealer is usually 
delivering in the early hours of the morning, along with 
his competitors. Later in the day he is about the plant, 
assisting with the preparation of the milk for the follow- 
ing day, and still later in very many instances, he is doing 
what little bookkeeping he finds necessary. Thus the 
working day of some of these dealers is easily from twelve 
to sixteen hours in length seven days in the week. 

In most cases the duties of the business are largely per- 
formed by the proprietor himself or by his partners and 
himself. The writer has in mind, for example, two un- 
usually successful small companies in Milwaukee, Wiscon- 
sin, each composed of several brothers. Several Columbus 
concerns are also composed of small groups of men, each 
of whom has a direct interest in the company. In all of 
these instances every member of the firm is working for 
new business and each is anxious to stop all leaks of what- 
ever kind. Although such hired labor as they find nec- 
essary may work only the regulation city work-day the 
members of the company themselves are willing to work 
for long hours in a pinch, and in many instances do so 
regularly. Furthermore, men so vitally interested in the 
business, doing largely their own work, are more ready to 
get along with inferior equipment than are hired employees. 

In some of these smaller plants cheap labor may be and 
is used. This is made possible by the fact that members 
of the family may be utilized for so large a proportion of 
the work and to the fact that unskilled labor can be more 
readily depended upon, since it can receive close super- 
vision. Illustrative of the first point is the fact that in 
Kansas City in September, 191 8, 28.5 per cent of the per- 



86 THE MARKETING OF WHOLE MILK 

sons engaged in bottling and delivery "were either the 
employers themselves or connected with the employer's 
family and did not receive a stipulated compensation for 
their services." ^ 

Another explanation of the small producer's staying 
power is the fact of a very low overhead expense. There 
is seldom much of an office force, very often none at all. 
The investment in equipment is commonly low, due to 
the fact that there is relatively little equipment and that 
often of an obsolete and inferior type. The Massachusetts 
Experiment Station found that although there was rela- 
tively little direct correlation between the size of business 
and cost of operating, yet the investment increased very 
rapidly as the size of the business became larger. Thus 
"an increase from an average of 360 quarts per day to 
an average of 710 quarts a day seems to multiply bottle 
investment nearly six times." ^ The real estate invest- 
ment is usually relatively low. These small plants very 
frequently operate on a back half lot. At least seven such 
concerns in Columbus occupy that portion of lots which 
adjoins the alley, the front part of the lot being in each 
case occupied by a house, a store, or other building. 

The small dealer also economizes by practically avoid- 
ing the surplus and shortage expense. He accomplishes 
this by supplying as nearly as possible his actual needs for 
his fluid milk trade through the selection of a few pro- 
ducers here and there whose production is more regular 
throughout the year than is that of the usual run of farmers. 
Quite often he is compelled to pay somewhat of a premium 

^ Barber, W. H., Milk Marketing Conditions in Kansas City, Sept., 1918, 
p. 61, U. S. Bureau of Markets, unpublished. 

* Massachusetts Experiment Station Bulletin 173, Cost of Distributing Milk 
in Six Cities and Towns in Massachusetts. 



DISTRIBUTION OF MILK 87 

for the milk of these producers, but such premium is offset 
by the fact that he does not have a large surplus to care 
for in the summer months nor a large deficit to make up 
during shortage periods in the fall. In the case of shortage 
two methods are at hand. He may go out and pay what- 
ever price is necessary for the small amount of extra milk 
needed. Very often this means only the purchase of a 
few extra cans from one or two farmers. Or he may buy 
from another dealer, although this is not usually possible 
during shortage periods. The small dealer can more easily 
take on and drop patrons. Some of the Columbus dealers, 
for example, quite frequently pay one farmer one price 
and another a different price for the same grade of milk. 
The large dealer, on the other hand, has an established price 
from which he can less easily vary. Another method by 
which a small dealer may meet a shortage is that of send- 
ing his delivery-men out with only a part of a load in the 
early morning, then sending them out with the balance 
of the load after some of the day's milk has been received 
from the farmers, pasteurized, and bottled. Thus by 
making some deliveries a few hours late, he can tide over 
a temporary shortage. 

Section 6. The Delivery Problem 

The delivery problem has been so prominent in dis- 
cussions of the milk question that it seems worth while to 
consider it at some length. The usual method of delivery 
in most American cities is by horse and wagon. For city 
delivery to the homes one horse is ordinarily used, although 
in the case of direct marketing delivery is often made with 
a two-horse outfit. For the wholesale trade the motor 
truck is coming to be quite generally used. Thus far it has 
not come into common use for retail delivery except in 



88 THE MARKETING OF WHOLE MILK 

the case of special milk. Men making a specialty of high- 
grade milk frequently have customers scattered rather 
widely over the city, which necessitates longer routes. 
A small Columbus dealer has used a two-ton truck for 
several years for retail and wholesale deliveries combined, 
but has not found it especially desirable for the retail trade. 
Too much time is lost in starting and stopping. With 
horse delivery, on the other hand, a horse soon learns the 
route and keeps moving for some time after the driver is 
well on his way to the house where he delivers milk. In 
fact, the horse and driver may meet some distance farther 
down the street, after the driver has delivered several 
bottles at neighboring homes. When the driver gets back 
into the wagon, he gets ready the bottles necessary for 
the next stop, makes records, etc., while the wagon is 
moving to the next place. With a machine, the driver must 
keep his hands on the steering wheel until the car comes 
to a full stop. Another Columbus dealer is just now try- 
ing out the small electric truck for retail delivery. These 
trucks are proving quite successful. 

A stop-watch study made on a number of Columbus 
routes in 191 7 showed an average running time of thirty- 
eight seconds and an average stopping time of fifty-one 
seconds for each wagon. In other words, but 42.7 per cent 
of the time was running time and 57.3 per cent was stop- 
ping time. Any saving made by the truck would have to 
come out of the 42.7 per cent of running time and out of 
time going to and from the plant. 

In Columbus and in many other cities much time is 
spent in delivering milk at the back door, although the 
wagon passes along the street in front of the houses. A 
study made in one of the better residential sections of 
Columbus indicates that nearly one-fourth of a driver's 



DISTRIBUTION OF MILK 89 

total time might be saved by having all bottles delivered 
on front steps instead of at the back door. 

In some sections of the country milk is usually delivered 
in the daytime, and in other sections it is delivered almost 
entirely at night. According to the Department of Agri- 
culture, in 191 8 daylight delivery of milk was practiced 
in most of the Pacific coast cities, whereas night delivery 
was more usual in the eastern cities.^ In some of the east- 
ern cities the practice prevails of delivering at night in the 
summer months and in the daytime or early morning 
during the winter months. The principal reasons given 
for night delivery are: 

"i. Custom. People have been accustomed to having 
their milk delivered to them before breakfast, and in some 
cases the same morning's milk is delivered. 

"2. Less delay due to traffic at night. Many dairies 
prefer the night-delivery system because it is much easier 
to make the delivery on account of fewer automobiles 
and other vehicles on the streets. 

"3. Deliveries are made during the cooler hours. In 
summer this is not only an advantage to the horse and 
driver, but also less attention is needed to keep milk cool 
than during the heat of the day." ^ 

In many cities daylight delivery seems to be winning 
its way, at least in all but the hottest weather. The follow- 
ing advantages have been given for daylight delivery: ^ 

"(i) Larger sales of milk; 

"(2) Better collections of cash; 

"(3) Better collections of empty bottles; 

^U. S. Dept. of Agr., Milk Plant Letter No. S3, July, 1918. 
2 Ibid. 

' Report of the Mayor's Committee on Milk, City of New York, Dec, 1917, 
p. 82. 



90 



THE MARKETING OF WHOLE MILK 



"(4) Less theft; 

" (5) Better working conditions for horses and drivers; 

"(6) Facilitates municipal supervision." 

The size of the load varies widely. It is to some extent 
limited by what a man can deliver and to some extent by 
other factors, such as length of route, whether customers 
are scattered or grouped; whether each takes a large or a 
small quantity; the amount of collecting done by the 
driver; and the amount of double tracking which he finds 
necessary. 

Frequently the size of load is surprisingly small. In 
New York, for example, the Mayor's Committee estimated 
the average load of retail wagons at 142 quarts, whereas 
a theoretical maximum was said to be 428 quarts. ^ The 
Department of Agriculture in 191 5 reported the average 
loads for five cities as follows: 

Table XVI 
Average Loads for Five Cities, 191 5 



City 


Total no. of 
wagons included 


Average load 
in quarts 


District of Columbia 


173 

305 
125 
182 
S7I 


30s 
296 
294 
277 
277 


Boston 


Pittsburg 


Baltimore 


Philadelphia 



Another factor which often keeps down the size of load 
is the fact that every progressive dealer is planning on 
an increase in business. When the size of load reaches 
its maximum, he is likely to re-route in such a way as to 
give each driver further room for expansion, thus building 
up the business. 

^ Report of Committee on Milk, City of New York, 19 17, p. 80. 



DISTRIBUTION OF MILK 91 

The pay of milk drivers is most frequently a combina- 
tion of salary and commission. In some cases, however, 
a straight salary is paid, and in other instances a straight 
commission on sales is the basis. Frequently there are 
bonuses of various sorts, as, for example, for a new cus- 
tomer, for the return of a large percentage of empties, 
and even for the appearance of the delivery outfit.^ 

An expensive phase of milk delivery is the collection 
of small accounts from many consumers. The difficulty 
of collection is aggravated by the fact that the amounts 
are for the most part too small to take to court in case the 
debtor will not settle. The particular methods in use are 
to some extent matters of custom and to some extent of 
preference. In some of the larger cities the collection is 
done largely by special collectors, the drivers doing 
nothing but delivering. Where this practice is followed, 
monthly statements are mailed to the customers, and the 
collectors visit only those who are delinquent in their pay- 
ment. The opposite is the practice in some instances, 
where the whole burden of collection is placed upon the 
driver, he being held responsible for the value of any milk 
sold and not paid for. Here the drivers may make col- 
lections at every opportunity or they may make a return 
trip once or twice a month for the purpose of collecting. 

A method which has come into quite general use in 
some cities is that of the use of tickets which are sold for 
cash. This system seems to be excellent in the case of day- 
light delivery but has some disadvantages in the case of 
night delivery. For example, in the latter case there is 
often trouble with theft, especially in the poorer sections. 
Then the ticket system usually requires that the con- 
sumer place a bottle and a ticket at a customary place 

1 Milk Plant Letter 42, August, 1917. 



92 THE MARKETING OF WHOLE MILK 

each night. An oversight then means that no milk is 
delivered, whereas in the daytime the driver would have 
rung the bell if no ticket had been put out. Moreover, 
with night delivery the ticket system requires occasional 
return trips for the purpose of selling tickets. In the better 
sections, of course, a check is frequently left in the bottle 
to pay for tickets. 

In comparing ticket and other systems, several factors 
are involved, the principal ones being losses from bad 
debts, time of driver and his equipment used in making 
collections or sales, interest on outstanding accounts or 
on money paid in advance, and cost of tickets and of cleri- 
cal help required by the respective systems. All of the 
above items, however, are difficult of accurate comparison. 
The loss on bad debts is entirely eliminated where tickets 
are sold for cash in advance. Under other methods such 
losses sometimes run as high as 2 per cent or more of sales. 
Time lost in making collections may be an important item. 
With night delivery, necessitating as it does one or perhaps 
several trips to the same house for collections, valuable 
time of man and outfit may be wasted in collecting one or 
two dollars. The writer has found numerous instances 
where from lo to 25 per cent of a driver's time was spent 
in making collections from the retail trade. Once custom- 
ers are used to the cash ticket system, practically all the 
waste of time may be eliminated. In the summer of 191 8 
the writer made the estirnate that in Columbus at that 
time the system of selling on account cost from .23 cent 
per quart to .8 cent per quart more than the cash ticket 
system. 

That a large amount of duplication exists in the de- 
livery of milk has been shown by practically every study 
that has been made. The following table showing the 



DISTRIBUTION OF MILK 



93 



situation in several Wisconsin cities in the summer of 1916 
is more or less typical of conditions elsewhere. 

Table XVII 
Extent of Duplication in Delivery Service in Five Wisconsin Cities, 1916 ^ 



City 


Total no. of miles 
of city street 


Total no. of miles 

traveled daily within 

city in delivering 

milk 


No. of times each 

mile of street is 

covered 


Milwaukee 

Oshkosh . . . 


602 . 63 

103.30 
80 

59 
81 


3,440.28 
377 

213-54 
142-5 
244 


5-71 
3-75 
2.67 
2.42 
3.01 


Beloit 


Eau Claire 

Madison. ... 





It would appear from the above table that each cus- 
tomer's house is on the average passed by more than five 
delivery wagons in Milwaukee and by two or three in each 
of the other cities. One of the reasons for the existence 
of a considerable amount of duplication is variation in 
quality of milk, real or supposed. Preference for the milk 
of a given dairyman is often so strong that a housewife 
will insist on receiving milk from him even though she 
moves to a distant part of the city. In order to hold such 
a customer, the dairyman may try to work up some trade 
in the new section. A large portion of the duplication is 
sometimes due to the willingness of each dairyman to meet 
the demands of consumers as to the particular time when 
milk is to be delivered. In one particular instance it was 
found that 20 to 50 per cent of the distance traveled by 
certain drivers was extra travel due to the demand on the 
part of some of the customers that their milk be delivered 
in time for breakfast. 

^ Wis Experiment Station Bulletin 285, p. 30. 



94 



THE MARKETING OF WHOLE MILK 



As the number of milk dealers has decreased, the amount 
of duplication has decreased, as is indicated by the follow- 
ing table: 

Table XVIII 

Saving Resulting from Consolidation of Milk Companies in Four Cities 



City 



Chicago, 111. . . 
Springfield, O . 
Cleveland, O. . 
Toledo, O 



No. of firms 
combining 



Total no. 

of routes 

before 

combining 



60 
36 
53 
65 



No. of routes 

eliminated 

by combining 



Total 8 214 

Weighted average per cent eliminated 



18 
6 

23 
7 

S4 



Per cent of routes 
eliminated 



30.0 
17.3 

43-2 
10.8 



25.2 



A survey in Rochester, New York, indicates a possible 
reduction of delivery labor expense in Rochester, if all the 
delivering were done by a unified system, of approximately 
37 per cent of the present cost.^ 

A unique suggestion has recently been made for the 
reduction of delivery expense. A writer in The Country 
Gentlemariy January 3, 1920, describes his method of de- 
livering fresh milk right to consumers in eight and a half 
quart cans at one dollar per can or twelve cents a quart. 
The consumer is furnished with quart bottles into which 
he empties the milk which has been delivered to him in 
the can, after which he places the bottles on ice. Two 
days later the milkman calls for his empty can and leaves 
a full one. This method, however, obviously has decided 
limits because of the unusual quantity taken by each cus- 

^ Report of Rochester Milk Survey, by the Committee of Public Safety of the 
Common Council, Dec, 1919, p. 126. 



DISTRIBUTION OF MILK 95 

tomer and because of the infrequency of the milkman's 
calls. 

Section 7. The Store as a Factor in Milk Distribution 

Milk for household use ordinarily reaches the consumer 
through one of three channels: 

1. It may go directly from producer to consumer. 

2. It may go from producer to a dealer and then directly 
to the home. 

3. Or it may reach the consumer through a retail store, 
in which case it may or may not pass through the hands 
of a milk dealer, since some stores are supplied directly 
by producers. 

As has been stated, the first channel is the usual one 
in the smaller towns and cities. In the larger places, how- 
ever, since it becomes practically impossible for any large 
proportion of the producers to reach the consumers di- 
rectly, the second and third channels must be utilized. 
In Ohio cities a considerable portion of the milk is handled 
by stores, the exact proportion varying from about 5 per 
cent to over 50 per cent of fluid milk consumed in the 
homes. 

The store as a factor in milk marketing has attracted 
attention, along with other marketing agencies, largely 
as a result of the ever-rising cost of living. The claim has 
frequently been made that the solution of the milk problem 
lies in the distribution of all milk through grocery and 
other stores, since these already distribute other foods. 
On the other hand, it has as frequently been proposed to 
eliminate sales by stores, or at least delivery by stores, 
and to have all milk delivered by producers or by milk 
dealers. 

It is obvious, however, that any careful analysis of the 



96 THE MARKETING OF WHOLE MILK 

problem must take into account more than merely the 
economy of getting milk to the consumer under the dif- 
ferent systems. If it were merely a matter of relative 
cheapness, one system or the other would very likely have 
driven its rival from the field before now. As a matter of 
fact, it is just as necessary to consider the nature and im- 
portance of the various types of services rendered as it 
is to study relative economy. In order to get a clear notion 
as to the part which the store plays in the distribution of 
milk, let us consider the particular services which it ren- 
ders. These services may be divided into two classes: 
(i) that of supplying any emergency needs for milk; and 
(2) that of providing refrigeration for milk until it is 
needed for immediate consumption. 

Emergency needs arise frequently in every home. Milk 
on hand may turn sour, or extra needs may arise after the 
milkman has passed. The grocer's refrigerator often 
serves as a neighborhood ice box. People who cannot 
afford ice frequently buy milk as well as other perishables 
just before meals. People doing light housekeeping follow 
the same practice. Both of these services, i. e., meeting 
emergency needs and supplying refrigeration, can un- 
doubtedly be performed more satisfactorily and more 
economically by the store, since their performance by 
the milk dealer would require special deliveries. 

The store as a part of our milk distributing system is 
also desirable from the producer's point of view, since it 
makes possible the sale of more milk than could be sold 
without it. The availability of fresh milk at every neigh- 
borhood grocery naturally makes for increased sales, and 
also gives to the whole-milk producer within the city milk- 
producing zone a better opportunity to compete with the 
outlying producer of milk for condensery purposes, since 



DISTRIBUTION OF MILK 97 

the latter's product is already everywhere sold by 
grocers. 

Thus it would appear that the store has definite and 
necessary functions to perform and that it cannot with 
advantage be entirely eliminated as a vendor of whole 
milk. 

Let us then take up the other side of the problem and 
ask whether or not the store can take over the entire 
service of retail milk distribution. There are several 
reasons why this cannot advantageously be done. 

In the first place, milk requires daily distribution. 
Nature does not recognize Sundays nor holidays; stores 
do. Cows give milk on Sundays as well as on week days. 
The processes of deterioration operate every day of the 
year. These two factors make it impractical for consumers 
as a whole to lay in on Saturday a supply of milk sufficient 
to last over Sunday. Were the stores to make deliveries 
on Sundays and on holidays, their entire delivery system 
would have to work for a time on those days as on any 
other days. There are in Columbus approximately eight 
hundred stores of one sort or another which sell milk. It 
would obviously be expensive and unsatisfactory for this 
large group to perform a service which is now rendered 
by about forty producers and milk dealers. Again, stores 
do not make daily deliveries to all their customers. Many 
make no deliveries at all, and none deliver to every cus- 
tomer every day. The present tendency, moreover, is 
to cut down deliveries still further. For stores to deliver 
milk daily to all their customers and to any others who 
might wish to buy milk from them would mean many 
additional stops for the delivery of milk alone, which would 
result in increased delivery costs for stores and vastly 
more duplication than now exists. 



98 THE MARKETING OF WHOLE MILK 

In the second place, milk demands delivery at a fairly 
regular hour in the day, because of its perishability and 
because of the fact that most people use milk more at cer- 
tain meals than at others, for example, at breakfast with 
cereals. Milk is probably more regularly used in this 
country than any other equally perishable food. Stores 
do not ordinarily make deliveries with sufficient regularity. 

The cash-and-carry system does not solve the problem, 
since many persons are not in a position to go to a store 
for their milk and have no one whom they could send. 
The very fact that milk is so regularly needed would make 
the cash-and-carry plan irksome to most persons.^ 

Just as above we reached the conclusion that the store 
cannot be eliminated from the milk distribution service, 
since it performs definite and necessary functions, so we 
must further conclude that it cannot with advantage take 
over the entire retail distribution of whole milk. 

Since the store can neither be wholly eliminated from 
the milk distribution service nor yet take over the entire 
service, what shall be our attitude towards it? A careful 

^ "Where the consumer relies on the grocery store, there is a tendency toward 
irregularity of milk consumption which is not good for the producer, the dealer, 
or the consumer. I sent a special investigator to every city in the United States 
that was trying 'the cash-and-carry plan' and I found invariably that among 
those consumers who relied on the grocery stores for their milk there was a 
marked irregularity of consumption with an average consumption below that 
prevailing in those districts where milk was regularly delivered. This increased 
consumption from the delivery of milk to the consumer direct is another reason 
why milk should be delivered regularly from the retail wagon rather than 
irregularly through grocery stores. The mother is sick, the children are late for 
school, — at the very time when milk is most needed it will not be at hand. . . . 
Of course, there must always be some grocery store trade, but this will be an 
accommodation which will be paid by consumers using it but not by all of the 
consumers in any district for those who do use it." Grand Jury Report of 
FrankHn County, Ohio, March, 1920, quoting Dr. Clyde L. King, who had 
made a study of the Columbus evidence. 



DISTRIBUTION OF MILK 99 

consideration of all available facts clearly leads to the 
conclusion that the store should be recognized as the 
proper agent for the performance of two phases of the 
milk distribution service, that of supplying emergency 
needs and that of providing cold storage for milk where 
consumers do not have such facilities. Any proper policy 
of price regulation should contemplate the continued 
performance of these services by allowing therefor an 
adequate return. 

Persons who have claimed that the store is the more 
economical channel for milk have quite often compared 
unequal services. They have, for example, compared 
the cost of handling and delivery by a store with the cost 
of delivery by a milk dealer, ignoring the fact that in the 
former case a part of the service has already been per- 
formed by the milk dealer who delivered the milk to the 
store. ^ In other cases the cost of retail delivery by a milk 
dealer has been compared with over-the-counter sales by 
the store. If a comparison is made, it should be between 
(i) the cost of delivery to the store plus the cost of han- 
dling and delivery by the store and (2) the cost to the 
milk dealer of delivering directly to a home. 

The margins now received by stores vary widely in 
various cities, ranging from nothing to three cents or more 
per quart bottle. The table on page 100 shows store 
margins for fifty-five cities in 1918.2 

In most cities stores retail milk at the same prices as 
milk dealers charge their family trade. This is true 
whether the consumer goes after his milk or has it delivered 
at his home with his groceries. Dr. Clyde L. King, of 

* See Retailing Milk Through Grocery Stores, U. S. Bureau of Markets, Milk 
Letter, October, 1919. 

^ Fifty-one of these cities are in Ohio. 



loo THE MARKETING OF WHOLE MILK 

Margin allowed Number of places 

Two cents per bottle 3 

Two cents per quart, one cent per pint 21 

One and one-half cents per quart, one cent per pint 3 

One cent per bottle 12 

One cent per quart, one-half cent per pint 7 

Irregular but less than 2 cents per quart 9 

the University of Pennsylvania, has proposed that milk 
dealers charge grocers nearly or quite the same price as 
is charged their family trade, making the stores take their 
profit out of an additional charge. The following quota- 
tion illustrates his method of approach in his capacity 
as milk price arbitrator for Pennsylvania and Maryland: 

"I was called not long ago to a city in Pennsylvania 
where the price to the consumer was fourteen cents a 
quart and the price to the grocery stores was twelve 
cents a quart, the grocer retailing to the consumer at four- 
teen cents a quart. About forty per cent of the total 
milk consumed in the city went through the grocery store. 
The dealers were demanding that milk should go up to 
sixteen cents a quart because they were losing money. I 
found through an accountant that they were not making 
money and that they were losing heavily on the grocery 
trade. I suggested that instead of advancing the price 
of milk they lower it to thirteen cents and charge the same 
price to the grocery store, assuring them they would then 
make more money and deliver to the consumer more milk 
because the consumer would be more satisfied. The one 
milk dealer in the group who had accurate records immedi- 
ately agreed to this and the plan was adopted. I have 
gone back there repeatedly and find that the policy has 
actually saved the dealers substantial sums of money. 

"A similar policy in other cities has brought similar 
results. The cost of milk distribution is reduced by the 



DISTRIBUTION OF MILK loi 

sale to retail dealers at the same price as the consumer 
pays, allowing the retailer to charge two cents above that 
price, because it concentrates business in the hands of those 
specially equipped to handle it. Milk should be kept and 
delivered under controlled refrigeration." ^ 

Milk sales differ essentially from sales of most other 
commodities in several important respects, and for that 
reason should not necessarily be placed in the same class 
with other goods in figuring the per cent of gross profits 
necessary. These differences are: (i) Milk has a daily 
turnover, whereas few other commodities, except certain 
fresh vegetables, have even a weekly or monthly turnover. 
Milk is seldom kept for over twenty-four hours before all 
is sold or the balance taken back or replaced with fresh 
milk by the dealer. (2) There is practically no loss on 
milk, since the dealers generally make good any losses from 
soured or spoiled milk. These differences are so funda- 
mental that there would seem to be no justification for 
the claim that milk, at a gross gain of ten per cent of sales, 
is a no-profit line, nor for the contention that the same 
percentage margin is required as is necessary for many 
other commodities with a less rapid turnover. 

In New York City the store problem has of recent years 
taken a new turn. In that congested center demand has 
arisen for a cheaper milk. Large quantities of milk are 
now retailed through stores in bulk, the consumer going 
after his supply with his own vessel. This "loose" milk, 
as it is called, is sold at several cents per quart less than 
milk bottled and delivered. In January, 1920, the "loose" 
milk retailed at thirteen cents a quart, whereas the bottled 
milk of similar grade was delivered at the homes at 
eighteen cents. According to King's theory, this large 

1 Grand Jury Report of Franklin County, Ohio, March, 1920. 



I02 



THE MARKETING OF WHOLE MILK 



consumption of milk sold through stores has probably been 
somewhat responsible for increasing the cost of distribu- 
ting that portion which is delivered to the homes, since the 
deliverymen of all the existing companies continue to travel 
approximately the same routes, which, however, are now 
somewhat more scattered. 

Section 8. The Surplus Problem 

One of the big problems in connection with the main- 
tenance of a city milk supply is that of the surplus. Both 
supply and demand fluctuate irregularly. Demand falls 
in cool weather, whereas supply is usually increased by a 
cool, wet spring. 1 Figure 7 shows the fluctuations for a 







Fig. 7. — Fluctuations in Supply and Demand of a Milwaukee Dealer. From 
Wis. Agr. Exp. Sta. Bui. 285. 

Milwaukee dealer and his patrons. It will be noticed 
that during a portion of the year a considerable shortage 

^ In the summer of 1917 New England had a tremendous surplus, due 
largely to a cool, wet spring, which made good pastures, much milk, and at the 
same time decreased consumption. New England Dairyman^ September, 1917, 
p. 8. 



DISTRIBUTION OF MILK 



103 




I04 THE MARKETING OF WHOLE MILK 

was made up by extra purchases from creameries or other 
sources. In this particular instance the surplus over fluid 
milk demand was not very great. The charts for Boston, 
Philadelphia, and several of the other cities are more 
typical in that they show a much larger proportion of sur- 
plus above fluid milk needs. The demand in all these 
instances fluctuates much less throughout the year than 
does the supply. Health ordinances may have more or 
less influence over the shape of the surplus chart; for ex- 
ample, where health regulations are stringent a dealer 
must provide for more milk to meet needs at shortage 
periods than would be the case if he could readily get 
additional milk from some cheese factory or condensery. 
For this reason Columbus must carry a greater surplus 
than would be necessary if it could readily tap at shortage 
periods the milk supply available around Springfield, Ohio, 
which is coming to be a condensery center. 

Producers have loudly protested that there is no such 
thing as a "surplus," asserting that the dealers were simply 
using the fact of the existence of a slight excess as a means 
of beating down prices. During the past few years, how- 
ever, statistics have been collected by numerous milk 
commissions and food administrators which have con- 
firmed the dealers' claims and convinced the producers.^ 

It is true that there is no surplus for consumers as a 
whole "nor for certain large dealers who also manufacture 
large quantities of the various by-products regularly. Of 
course in any case there is always a demand for all of the 
milk for some purpose, but some demands will take the 
milk only at the lower prices. In most cities the majority 
of the milk dealers do mainly a fluid milk business, and 
many of these plants are not equipped for the manu- 

^ New England Homestead, August 3, 1918, p. 76. 



DISTRIBUTION OF MILK 



105 



facturing of by-products. For these there is a very real 
surplus. 

The products into which surplus milk is ordinarily 
manufactured, such as condensed milk, cheese, butter, 
etc., are practically non-perishable and of high specific 
value, and can therefore be readily preserved and trans- 
ported for long distances cheaply. The result is that they 




^M. FtB. MAIS. APeiL. MM xTUNL ^ULY AUQ. SEPT OCT NOV OCC 

Fig. 9. — Monthly Variation in Price of Milk and in Cost of Production. From 
111. Agr. Exp. Sta. Bui. 224. 

can be produced largely during seasons when cost of pro- 
duction is lowest and that they can be produced far from 
market on cheap land. Condensed milk and cheese come 
largely from outside the milk belts of large cities or from 
other sections favorable to dairying, such as are found in 
Wisconsin, on the Pacific coast, and elsewhere. Butter 
is produced very generally as an adjunct to general farm- 



io6 THE MARKETING OF WHOLE MILK 

ing. All of these products are usually produced while the 
cows are on grass. Cheese was formerly produced almost 
entirely in the summer months. In the Sheboygan, Wis- 
consin, cheese district most of the factories used to close 
for the winter months. In December, 1919, only 22.5 per 
cent as much American cheese was produced in the United 
States as was produced in June of the same year. In De- 
cember, 1918, 22.6 per cent as much was produced as was 
produced in June, 191 8. In February, 1919, butter pro- 
duction was only 37 per cent of the production for 
June. The unsweetened, evaporated milk production of 
November, 191 9, was 51.4 per cent of the June produc- 
tion. ^ 

Fresh milk for city use, on the other hand, must be pro- 
duced within a relatively short distance of the city within 
which it is to be marketed. It is often produced on land 
which has a high value for other purposes, and where home- 
grown feeds are high-priced, owing to the strong city 
demand for them. Hence a supply of fresh milk is forth- 
coming with sufficient regularity only when prices are 
high enough to maintain that supply during seasons of 
highest cost and lowest production, which usually means 
a somewhat higher price than that paid for milk entering 
milk products. When, however, more is produced than 
is required for direct consumption, the balance must be 
utilized for some other purpose, — and we have a "sur- 
plus." 2 

That the surplus problem really arises out of the lower 
cost of production in summer than in winter should be 
fairly clear when we consider that for years a sufficient 
quantity of milk has been forthcoming in the winter months 

1 The Market Reporter, April 3, 1920. 

2 See Hoard's Dairyman, June 13 and July 25, 1919. 



DISTRIBUTION OF MILK 107 

and a great surplus produced in the summer months, even 
though summer milk has invariably had to face a lower 
price, — this in spite of the fact that it is possible to pro- 
duce a fairly uniform supply. Farmers have long been 
urged to do away with the surplus by producing an even 
supply throughout the year. Some few farmers do try 
to act on this advice, but most of them find that they can 
better afford to produce an uneven supply and take the 
lower price in summer. To urge such a change is futile 
if costs are such as to make it more profitable to prod- 
uce in the summer months. Figure 9 taken from the 
Illinois Experiment Station Bulletin 224, page 17, shows 
the average monthly variation in price of milk and in cost 
of production for a series of years. If this chart is correct, 
no amount of advice will induce farmers to do away with 
the summer surplus problem. Another remedy that is 
very frequently proposed is that advertising be used so 
to stimulate demand as to absorb surplus. Thus far the 
experience has been that the demand for fluid milk is not 
sufficiently elastic to respond to advertising in any measure 
corresponding to the surplus. 

Among the numerous plans for meeting this problem 
which have recently been suggested, probably none has 
received more attention during the past two years than 
that of the cooportatlve manufacture of the surplus into 
the various by-products by the farmers themselves. The 
Dairymen's League of New York and surrounding states, 
the Milk Producers' Cooperative Marketing Company 
of Chicago, the Twin City Milk Producers* Association, 
several of the Pacific Coast associations, and numerous 
others have already taken steps along this line. The Twin 
City Milk Producers' Association was in September, 1919, 
operating ten cheese factories for the purpose of utilizing 



io8 



THE MARKETING OF WHOLE MILK 




DISTRIBUTION OF MILK 109 

any surplus,^ It may be questioned, however, whether 
the farmers will in the end receive a higher net price in all 
cases. These cooperative plants will have to handle the 
milk in much the same way as the men to whom the 
farmers formerly sold the surplus and will have to enter 
the trade channels in competition with them. Unless 
the farmers get operators who are skillful and business- 
like and elect directors who are sufficiently far-seeing and 
who have a sufficiently clear conception of the price-mak- 
ing forces, some of these plants are certain to meet with 
financial reverses. B. H. Rawl, in a recent article, gives 
the following requisites for the successful operation of a 
plant such as is contemplated by a large number of these 
producers. "First, efficient management; second, large 
volume of milk of high quality; third, adequate equipment 
and capital; and fourth, markets." 

"All of these conditions," he continues, "are not neces- 
sary to enable the creamery to produce certain by-prod- 
ucts, but they are necessary for the plant that utilizes all 
the constituents of milk to the best advantage." ^ 

Philadelphia has, since January, 1920, been handling 
its surplus problem by paying a basic price, determined 
by conference, for the following percentages of the average 
monthly production for the months of October, November, 
and December, 191 9: 

January loo April.... loo July no 

February. ... 100 May.... no August 105 

March 100 June .... 1 10 September. . 100 

"For milk produced in excess of the stated percentage 
amounts the price to be received would be determined 

^ Milk Magazine, Sept., 1919, p. 17. 

* Hoard's Dairyman, Nov. 28, 1919, p. 880. 



no THE MARKETING OF WHOLE MILK 

by taking 1 20 per cent of the average daily price of New 
York 92 score (solid pack) tub creamery butter, as pub- 
lished by the U. S. Bureau of Markets, for the month. 
The price of 100 pounds of milk would be determined by 
multiplying the percentage of butterfat in milk by this 
price. This arrangement is expected to simplify the prob- 
lem of determining the price to be received by producers 
for surplus milk in the Philadelphia district." ^ 

In January, 1920, the price of 4 per cent surplus milk 
in Philadelphia was $3.12 as compared with a basic price 
for fluid milk of $3.61.2 

The New England milk producers have probably had 
more experience with surplus plans than have the pro- 
ducers of any other section of the United States. For 
many years milk had been sold in that market at a summer 
and winter price; for example, in 1886 and 1887 the sum- 
mer price was thirty cents per eight and one-half quart can 
and the winter price thirty-six cents. These prices, how- 
ever, applied only to milk which the dealers sold as fluid 
milk plus a margin of about 5 per cent. "All surplus 
beyond this was made into butter by the contractors at 
their creameries on the farmer's account, allowing each 
month, as the value of the butter, the average of the job- 
bing price of butter quoted by the chamber of commerce 
during the month and charging four cents per pound for 
making. Thus the farmer was sure of getting at least 
butter value for all the milk he could make." ^ The 
farmers, however, raised so many objections to this system 
that in 1889 ^^^ matter was taken up with the state board 
of arbitration, which decided that the surplus principle 

^ The Market Reporter, Jan. 17, 1920. 

2 Milk News, Feb., 1920, p. 10. 

* Report of Industrial Commission, 1900, Vol. 6, p. 409. 



DISTRIBUTION OF MILK iii 

was a sound one.^ The surplus continued to be a matter 
of controversy until the spring of 1910, when the surplus 
system was discontinued as a result of a dairymen's 
"strike" and a graduated price substituted. This prac- 
tice continued until May, 191 8, when the surplus plan was 
again resumed. At that time the Regional Milk Com- 
mission for the New England states secured an agreement 
between producers and distributors which authorized the 
commission to inaugurate a surplus plan, which the com- 
mission did shortly afterwards. The plan was quite elabo- 
rate and provided numerous checks, among which was a 
set of records to be kept by the dealers which would enable 
the milk administrator to verify the dealers' reports and 
thus do away with suspicion on the part of the producers. 
Much objection had been raised to the earlier plans on 
the ground that the dealers were manipulating their rec- 
ords. The plan as put into operation provided that each 
dealer was to pay for fluid milk an established price and 
for that portion worked up into by-products a price es- 
tablished by the milk commission and later by the milk 
administrator. Since each dealer could choose his own 
channels for utilization of surplus, the result was a widely 
varying price for different dealers, which to some extent 
caused dissatisfaction amohg producers. ^ 

A similar plan was tried in Akron, Ohio, in the summer 
of 191 8, without, however, any public supervision. The 
plan was abandoned at the end of the first six months, 
partly because of the fact that it led to different prices 
paid by different dealers. For example, in April, May, 
and June of that year the following prices prevailed : 

^ Report of Industrial Commission, 1900, Vol. VI, p. 410. 
* The plan is fully discussed in the New England Dairyman, May, 1918, 
pp. 2 and 3. 



112 THE MARKETING OF WHOLE MILK 

Table XIX 

Operation of Akron, Ohio, Surplus Plan 





Quoted 

price 


Skim milk 
per cwt. 


Butterfat 
per lb. 


Dealer A 


Dealer B 


Month 


Per cent 
surplus 


Actual 
price 


Per cent 
surplus 


Actual 
price 


April. . . . 

May 

June. . . . 


^3-35 
3-35 
3-35 


40^ 
40^ 
40^ 


A7i 
46^ 


33 
44 
45 


^3" 
2.98 
2.92 


12 
10 
16 


^3.20 
3.06 
3 14 



The Mayor's Committee (New York, 19 17) proposed 
a plan somewhat Hke that since put into operation in New 
England, except that the dealers were to pool their pur- 
chases and sales, so that the producers would all be paid 
the same price, no matter to which dealer they sold. 

"If producers enter into agreements with each other 
for collective bargaining with the distributors, and dis- 
tributors enter into agreements with each other for col- 
lective buying from producers, a mechanism is furnished 
whereby surplus milk can be easily handled in a way en- 
tirely fair and just to both parties. To illustrate this the 
following example may be taken: 



Dealer 


Pounds of 
milk bought 


Pounds of 
milk sold 


Surplus 
milk 


I 


10,000 
20,000 
50,000 


8,000 
12,000 
45,000 


2,000 


2 


8,000 


•? 


5,000 




Total 


80,000 
100% 


65,000 
81.25% 


15,000 
i8.7S% 


Percentage 





"In the above table it appears that there was 80,000 
pounds of milk purchased, of which 65,000 pounds was 



DISTRIBUTION OF MILK 113 

sold as fluid milk, amounting to 81 .25 per cent; the balance, 
15,000 pounds, was surplus milk, amounting to 18.75 P^^ 
cent. In this way the quantity of milk purchased by all 
retailers of the City of New York and the quantity sold 
as fluid milk and the quantity of surplus could be esti- 
mated at the end of each month and the percentage of 
surplus milk stated. In the above example it is suggested 
that the producers be paid for 81.25 P^^ ^^^^ o^ ^^1 the 
milk produced by them at the full fluid price and that 
they be paid for 18.75 P^^ ^^^^ °^ ^^^ ^^^^ ^^ ^ price which 
corresponds to the full market price for butter, plus the 
full market price for by-products of butter, including skim 
milk and buttermilk. Such a plan would require that 
some person, or commission, in whom both producers and 
dealers had confidence, should furnish a statement of the 
total quantity of fluid milk bought and sold as fluid milk 
and of the total quantity of surplus milk which could not 
be sold as fluid milk, but must be manufactured into milk 
products. 

"From the producers' standpoint this plan pays the 
producer all that he could possibly secure out of the busi- 
ness if he were marketing the milk himself. The producer 
could not expect to sell as fluid milk any more fluid milk 
than the market will absorb. Consequently, if the retailer 
were eliminated and the producers were retailing their 
own product, the surplus milk unsold as fluid milk and 
thrown back on their hands would be the same surplus 
which would be in the hands of the distributors under 
the plan above mentioned. The price producers would 
receive for this surplus would be the same price they 
would receive from the dealer in the above mentioned 
plan. 

"It is a fact that the distributor is in a much more ad- 



114 THE MARKETING OF WHOLE MILK 

vantageous position than the producer for the handhng 
of surplus milk, both in the processes of manufacture and 
in the matter of marketing. The producer could not 
expect to manufacture surplus milk or market the 
same in any different way or any more cheaply than 
these processes can be performed by the large distrib- 
utor. 

"The particular value to the producer of pooling his 
interests and arriving at a percentage of fluid milk and a 
percentage of surplus milk which is uniform for all pro- 
ducers is that payment would be entirely uniform for all 
producers. The irregularities of milk production in dif- 
ferent districts and the differences in the marketing facili- 
ties of different dealers have for many years been imposing 
great hardships or given advantages to producers and dis- 
tributors which are unfair to the industry as a whole. If 
uniformity of market price is so desirable that producers 
recognize the importance of united action, then it is a 
logical corollary that there should be uniformity in the 
percentage and in the price of surplus milk and that all 
farmers and distributors should be treated alike in this 
matter. 

"The payment for fluid milk and surplus milk, accord- 
ing to the percentage of the entire supply sold as fluid milk 
and manufactured as surplus milk, would, however, en- 
tail a severe hardship on the distributor if his percentage 
of fluid milk sold and surplus milk manufactured did not 
correspond to the percentages of the entire supply. For 
example, in the tabulation above given we can assume 
that each of the three dealers is compelled to pay for 81.25 
per cent of his fluid milk at full price and for 18.75 P^^ 
cent of his milk at butter prices. Under these conditions 
the following tabulation indicates the result: 



DISTRIBUTION OF MILK 



115 



Dealer 


Total 
purchases 


Paid at 
full price 


Over- 
paid 


Under- 
paid 


I 


10,000 
20,000 
50,000 


8,125 
16,250 
40,625 


125 
4>2SO 




2 , 

■3, 


4.375 





"In the above table it appears that if each dealer should 
pay to his producers at full price for fluid milk for only that 
portion of his supply which corresponded to the total per- 
centage of fluid milk sold on the entire market, dealer 
No. I would have overpaid for 4,250 pounds, while dealer 
No. 3 would have underpaid for 4,375 pounds. In the 
former table it appears that dealer No. 3 actually mar- 
keted 45,coo pounds at full price, but in the lower table 
he paid for only 40,625 pounds at full price. On the other 
hand, dealers Nos. i and 2 paid for more than they sold 
at full priced In short, dealers Nos. i and 2 would sustain 
losses by this transaction, while dealer No. 3 would have 
an unfair gain. It is obvious that the adjustments could 
be easily made by the dealers themselves, through some 
form of exchange or clearing house, whereby those dealers 
who have sustained undeserved losses can be recompensed 
by those dealers who have made unmerited profits. The 
undeserved losses and the unmerited profits are exactly 
equal to each other, consequently the exchange could 
bring about an adjustment between the dealers of these 
differences without aff^ecting their individual business 
interests in the slightest degree." ^ 

The cost of meeting surplus and shortage has been 
placed at different figures. The Alderney Dairies of Phila- 
delphia had kept records for twenty years prior to 1913 
and from these calculated that at that time it had cost 

' Report of the Mayors' Committee on Milk, City of New York, 19 17, pp. 68-70. 



ii6 THE MARKETING OF WHOLE MILK 

them .5 cent per quart on their entire sales to keep supply 
and demand adjusted.^ In Boston, where the matter of 
surplus has been a bone of contention for nearly forty 
years, the dealers made a deduction from the farmers' 
milk checks for the month of May, 1918, of i.i cents per 
quart because of an over-production of 34.37 per cent for 
the month. 2 For the whole of 191 8 the average price 
awarded by the New England Milk Commission was 8.58 
cents per quart; the actual price paid was 8.21 cents. The 
difference of .37 cents was loss on surplus.^ In one of the 
Ohio cooperative plants in July of 191 9 the loss on surplus 
milk amounted to approximately .75 cent per quart on 
all bottled milk sales. In Rochester, New York, the 
loss on surplus was estimated at .4337 cent per quart 
in 1919.^ 

One big objection to such a plan as that proposed by the 
New York Committee or the plan followed in Boston is 
that some sort of public supervision is necessary. Even 
with such supervision the Boston producers question the 
accuracy of the reports made by the dealers.^ Another 
objection is that neither plan seeks to shift the surplus 
burden to the particular producers whose heavy summer 
production caused it. This the Philadelphia plan seeks 
to do. The latter plan also makes it possible for the 
producers to know in advance what price they will 
get. 

None of these systems, however, really solves the sur- 
plus problem. Nor is it likely to be solved until both pro- 
ducers and dealers approach the queistion in a more frank 

* Annual Report of International Milk Dealers' Association, 1913, pp. 75-79- 
2 Nezv England Homestead, Aug. 3, 1918, p. 76. 

* New England Dairyman, Mar., 1919, p. 8. 

* Milk Survey of the City of Rochester (1920), p. 154. 
^ New England Dairyman, Sept., 1919, p. i. 



DISTRIBUTION OF MILK 117 

and open way, or until producers themselves arrange to 
take care of the surplus, distributing the burden equally 
among themselves in proportion to the amount of surplus 
produced. 

Section g. Cost of Distribution 

Cost of distribution has been stressed particularly in 
almost every discussion of the milk problem. During the 
past three or four years especially there have been numer- 
ous investigations along this line. Although the results 
of quite a number of these have been published, many of 
the published figures are not comparable because of 
changes in the price level between the different dates 
covered by the investigations, as well as because of dif- 
ferences in the methods of ascertaining the costs. 

The discussion of costs has arisen largely out of the wide 
difference between what the farmer gets and what the 
consumer pays. Farmers have repeatedly insisted that 
they were entitled to a larger proportion of the consumer's 
dollar than they have been getting. Though the propor- 
tion has usually fluctuated about the fifty-fifty mark, the 
farmer has frequently received less and at times more. 
The president of one of the largest milk producers' associ- 
ations recently said that the cost of milk distribution 
should not exceed 35 per cent of the consumer's dollar, 
which would leave the farmer 6^ per cent to cover cost 
of production, cost of transportation, and profit. The 
justice of any specific percentage, whether it be 35 or 50 
per cent or any other figure, cannot be established once 
for all, but will have to be ascertained for each particular 
case. With many manufactured products the proportion 
of the consumer's dollar going to the original producer is 
even smaller than in the case of milk. There is no reason. 



ii8 THE MARKETING OF WHOLE MILK 

however, why farmers should not inquire why the margin 
is as wide as it is in the case of their commodity, nor why 
they should not attempt to narrow it. They are interested 
in selling as much of their product as they can produce. 
They believe that a narrower margin would mean lower 
retail prices and a consequent increased demand, as well 
as higher farm prices, so that a reduced cost of distribu- 
tion would directly benefit both them and the con- 
sumer. 

Furthermore, they are justified in proposing to take 
up certain phases or all of the distribution, if they think 
that by doing so they can reduce the margin between 
themselves and the consumer. 

In much of the discussion the terms "cost" and 
" spread " are confused. By cost of distribution is meant 
the expense incurred in moving the product from farm to 
consumer. It is usually thought of as the difference be- 
tween what the producer gets and what the consumer pays 
less the dealer's profit. The latter is commonly believed to 
be a big item. The term "spread" has recently come into 
use to designate the difference between the dealer's selling 
price for a given unit and the price paid the farmer. This 
difference cannot be considered synonymous with the term 
"cost of distribution." For example, a milk dealer sells 
a part of his milk in quart bottles to retail trade, a part 
to retail trade in pint bottles, a part to the wholesale trade 
in quarts and pints, and some to the wholesale trade in 
bulk, each going at a different price. Obviously the spread 
or difference between his retail price and the quart price 
paid to the farmer does not measure his profit nor his true 
margin. The true margin can only be ascertained by 
properly weighting the amounts sold in the different ways. 
Table XX illustrates this point. 



DISTRIBUTION OF MILK 



119 




I20 



THE MARKETING OF WHOLE MILK 



Table XX 
A Columbus, Ohio, Dealer s Margins 



Pricg 
per qt., 



13 
14 
II 
12 



Hozv sold 



By quart retail delivered . 
By pint retail delivered . . 

By quart wholesale 

By pint wholesale 



Per cent of milk 
sales in each class 



18.5 
15-5 
36.0 
30.0 



Amount contributed 

to the price of an 

average qt. by each 

class 



$ . 02405 
.02170 
.03960 
.03600 



Weighted average price received $. 12135 

Cost per quart 075 



True spread or margin ^.04635 

Commonly spoken of as spread (^.13-^.075) 055 



The spreads of different dealers vary widely. Although 
they may be indicative of differences in costs, they are by 
no means conclusive. One of the instances of differences 
upon which there has been a great deal of comment is that 
between the spreads of Philadelphia and of New York. 
Philadelphia has the lower margin and also the lower re- 
tail price. In 1913 the average price in Philadelphia was 
8 cents, in New York 9 cents a quart. For 191 9 the aver- 
ages were 13.6 cents and 16. i cents respectively, a differ- 
ence of 2^2 cents as compared with a difference of i cent 
when the price was lower. The retail price in Philadelphia 
had increased 70 per cent, in New York 79 per cent. The 
fact that these ratios have practically been maintained 
over a period of years in spite of the fierce competition in 
both places indicates that there are probably fundamental 
reasons for such differences. 

"Unquestionably the net profits realized by the leading 
milk marketing concerns, on the basis of both capital in- 



DISTRIBUTION OF MILK 



121 



vested and volume of sales, were larger in the case of some 
cities than of others; but audits of the accounts of some 
of the representative milk marketing organizations in dif- 
ferent cities show that there is not even a general correla- 
tion between net profits and the margins of gross profit 
on retail sales. Even if per unit costs of plant operation 
and delivery service were approximately the same, the 
net profits of any particular business enterprise would be 
dependent to a large extent upon the proportionate volume 
of sales at the prevailing market prices to different classes 
of wholesale and retail trade." ^ 

The following table from the Bureau of Markets gives 
dealers' spreads or margins in twelve of the largest cities 
of the United States for the nine months' period ending 
March, 1919.2 

Table XXI 

Dealers' Margins {Spread Between Price Paid and Selling Price) on Quart Sales 
of Standard Grade Milk Delivered to Different Classes of Trade 



City 



New York 

Chicago 

Philadelphia 

Boston 

Baltimore 

Pittsburg 

Cleveland 

Detroit 

Milwaukee.. 

Minneapolis 

New Orleans 

San Francisco 

Averages of above cities. 



Bulk milk 

to hotels, 

cents 



2.9s 
2.89 
2.65 
3-96 
4.90 
3.46 

2.37 
3.28 

1-74 
2.47 
1.67 
2.18 
2.876 



Bottled milk 

to hotels, 

cents 



95 
85 
95 
65 
15 
36 
97 
77 
62 

52 
42 
57 
731 



Bottled milk 

to families, 

cents 



.87 
.64 
.76 
•63 
.76 
.63 

-19 

.02 
.24 
.84 
.42 

■05 
•92 



^ Hoard's Dairyman, Jan. i6, 1920, quoting U. S. Bureau of Markets. ^ Ibid. 



122 THE MARKETING OF WHOLE MILK 

As in every other industry, costs in milk distribution 
vary widely. Table XXII shows the variations in the 
cost of handling milk at city plants in Detroit in 191 5. It 
will be noticed that the costs vary from 2.3 cents to 7.2 
cents among the different dealers.^ 

The delivery costs vary nearly as widely, as is shown 
in Table XXIII.2 

Costs, of course, will also vary from time to time with 
changes in prices, in wages, and in methods. Table XXIV 
gives the results of a number of investigations as to the 
cost of distribution in various cities. Some of these are 
for retail only, and others are for a mixed business. Nos. 9 
to 12, inclusive, show the cost of distributing a quart of 
milk through four different channels used by the Borden 
Company in New York City, No. 9 being on routes of 
their family trade. No. 10 the company's sales to retail 
stores, No. 11 retail sales at the company's own stores, 
and No. 12 wholesale bulk sales. It should be pointed 
out that although the company made a profit on only 
those sales made at its own stores (No. 11), this is no 
evidence that the store method is the more economical. 
These sales were made at the same prices as were charged 
on the company's retail routes, although the consumer 
went after his milk. Nos. 22, 23, and 24 make a some- 
what similar comparison for the city of Rochester, New 
York, as was made for New York City. It will be noticed 
that in the column headed "Profit or loss" the items are 
frequently loss. This of course is due to the fact that 
many of these investigations were made at times when 
the dealers were trying to raise prices or had raised 
prices on the grounds of increased costs of material or cost 
of milk. 

^ C/. S. Department oj Agri. Bulletin 639, p. 18. 
2 Ibid., p. 21. 



DISTRIBUTION OF MILK 



123 



Table XXII 
Relation of Cost of Handling to Capital Investments, Supplies, and Labor in 
Twenty-Eight City Milk Plants 



u^^ 


J7 .•.. _ 


Gallons 

handled 

daily 


Investments 


Supplies 2 


Labor 


iianaimg 
cost per 
gallon ^ 


Total 


Per gallon 

handled 

daily 


Per day 


Per 

gallon 


Per day 


Per 

gallon 


Cents 










Cents 




Cents 


2-3 


1,600 


^13.300 


^8.31 


14.96 


0.9 


^13.68 


0-9 


2 


4 


35° 


4.320 


12 


34 


11.84 


I 


2 


1.99 


.6 


2 


6 


9,706 


267,575 


27 


57 


70.01 


^ 


7 


167.82 


1-7 


2 


6 


2,000 


16,824 


8 


41 


16.57 




8 


27.21 


1-4 


2 


7 


850 


7,154 


9 


54 


5-48 




7 


10.68 


1-4 


2 


8 


1,450 


41,643 


28 


72 


9.76 




7 


14-25 


I.O 


3 


I 


1,450 


18,720 


12 


90 


18.42 




3 


17.03 


1.2 


3 


3 


220 


1,917 


8 


71 


2.45 




I 


3.81 


1-7 


^3 


3 


340 


3,502 


10 


30 


3.24 







5 -98 


1.8 


3 


4 


470 


2,527 


5 


38 


4.87 







9.86 


2.1 


3 


6 


400 


5,312 


13 


28 


4.20 







, 7-40 


1-9 


3 


7 


165 


3,029 


18 


36 


1-95 




2 


2.71 


1.6 


^3 


8 


2,119 


97,457 


45 


99 


11.79 




6 


47-31 


2.2 


3 


9 


425 


7,595 


17 


87 


5-6i 




3 


7.12 


1-7 


4 


4 


335 


4,542 


13 


56 


5-43 




6 


5-98 


1.8 


4 


4 


100 


I,i86 


II 


87 


1.64 




6 


2.00 


2.0 


4 


5 


310 


3,847 


12 


41 


5-18 




7 


5. 84 


1-9 


5 


2 


230 


4,927 


21 


42 


2.35 







7-13 


3-1 


5 


2 


1,300 


7,315 


5 


63 


36.10 




8 


9-97 


.8 


5 


3 


100 


1,829 


18 


29 


1. 18 




2 


2.99 


3-0 


S 


4 


240 


7,141 


29 


75 


3.70 




5 


6.04 


2.5 


5 


4 


S30 


20,251 


38 


21 


6.76 




3 


10.54 


1.0 


6 


I 


I3S 


1,829 


13 


55 


1-57 




2 


5.60 


4-1 


6 


8 


85 


2,705 


31 


82 


1.24 




5 


3.00 


3-5 


6 


8 


1,260 


110,592 


87 


77 


33-78 


2 


7 


21.80 


1-7 


7 





145 


4,274 


29 


48 


3.58 


2 


5 


4.70 


3-2 


7 


.1 


90 


2,762 


30 


69 


2.18 


2 


4 


2.56 


2.8 


7 


.2 


40 


1,725 


43 


13 


•51 


I 


3 


1-50 


3-8 


Ave. 4.4 


940.9 


23,778 


21 


97 


10.23 


I 


4 


15-23 


2.01 



^ These unit costs include charges for depreciation and interest on capital 
invested, supplies, and laKor expenses (all the items which could be definitely- 
charged against handling in plant). 

2 Supplies include charges for fuel, ice, power and light, bottles, caps, washing 
powder, brushes, etc. 



124 



THE MARKETING OF WHOLE MILK 



Table XXIII 
Relation of Costs per Quart Delivered to Investments in Delivery Equipment, 
Average Number of Quarts Delivered per Wagon, and Per Cent of Sales at Retail 
for 28 Dealers 







Investments in deliv- 
ery equipment 


Number 
of deliv- 


Average 

quarts 

delivered 


Pz,* 




Cost per 




Per 


rer cent 
of sales 


quart ' 


Total 


gallon 


ery 


per 


at retail 




delivered 


wagons 


zuagon 








daily 




daily 




Cents 












O-S 


$1,005.00 


$3.24 


I 


1,240 


0.0 




8 


956.00 


4-35 


3 


293 


n 


3 




9 


1,527.00 


9-25 


I 


660 


50 







I 


14,899.10 


8.92 


14 


477 


54 


5 




2 


527-50 


4.06 


2 


260 


73 


I 




2 


7,280.00 


6.31 


12 


384 


62 


5 




3 


2,480.00 


6.12 


4 


405 


47 


I 




2 


8,779.00 


6.05 


14 


414 


93 


3 




2 


870.00 


8.70 


I 


400 


11 


2 




3 


2,907 . 00 


12. II 


3 


320 


60 







3 


1,180.00 


8.74 


I 


540 


77 


3 




3 


40,050 . 85 


18.90 


14 


605 


58 


9 




4 


170,090.04 


1752 


99 


392 


81 


3 




4 


i5>osS-5o 


9-45 


16 


400 


53 


3 




4 


692 . 00 


8.14 


I 


340 


62 


5 




4 


2,096 . 00 


6-45 


3 


433 


76 


9 




4 


8,779.00 


6.86 


14 


366 


34 


5 




5 


3,030.00 


10.10 


4 


300 


65 







5 


1,160.00 


4.64 


5 


200 


50 







S 


1.595- 50 


6-94 


3 


307 


73 


8 




5 


575- 00 


14.38 


I 


160 


85 







6 


1,570.00 


17.44 


2 


180 


61 


5 




6 


2,740 . 00 


8.06 


4 


340 


74 


5 




6 


7»375-oo 


17-35 


4 


425 


65 







7 


785-50 


7.85 


2 


200 


64 


3 




7 


2,623.33 


7.83 


3 


447 


71 


4 




8 


2,831.50 


5-34 


6 


353 


80 





2 


S 


29,225.35 


23.19 


20 


252 


56 


9 


2l 


38 


2 11,881.75 


''9-58 


29 


2396 


263 


9 



^ These unit costs do not include items of administration, office expenses, ad- 
vertising, licenses, insurance, taxes, and other miscellaneous expenses. ^ Average. 



DISTRIBUTION OF MILK 125 

There are numerous reasons for such variations in costs 
as are shown in these tables. One reason is that of the use 
of different trade channels in varying proportions, as 
shown in the discussion of Borden's costs above. Size 
of business is another factor making for differences in costs, 
although there is apparently not always a close correlation 
between size and costs. Table XXV shows a somewhat 
smaller cost for the two middle groups than for either the 
smallest or the largest in size, whereas the largest appar- 
ently has the highest costs. Table XXVI, however, in- 
dicates that the plant expense is lowest for the largest 
concerns, while Table XXVII would indicate that the 
delivery cost of the same group is somewhat higher in 
the case of the larger dealers. The plants of medium size 
again have the advantage. The figures recently published 
in the report on the investigation of the milk supply of 
Rochester, New York, indicate that the labor costs per 
quart vary in much the same way as do the total costs 
shown by the Massachusetts study as set forth in Table 
XXIV above, namely, that the middle group operates 
somewhat more cheaply than do the smaller dealers, while 
the highest costs of all are those of the larger dealers. Be- 
cause of their large volume of business the latter are able 
to operate on very narrow margins of profit. Table XXIX 
gives the results of the Rochester survey. 

In addition to variations in costs arising out of type of 
business, size of business, etc., there is the whole question 
of the relative efficiency of dealers. Properly coordinating 
the various items of labor and equipment in a complex busi- 
ness which must be adjusted to local conditions requires a 
high degree of business skill. Methods of assembling and dis- 
tributing also make a difference, as do also local marketing 
conditions arising out of the degree of concentration in the 
business, demands of the consumer for special service, etc. 



126 



THE MARKETING OF WHOLE MILK 



Table 

Compilation of Costs of Distribution, Prices Paid 



No 



Year 



1914 
1914 
1914 
1915 
1916 
1916 
1917 

1917 
1917 



1919 

1919 
1919, July 
1919,Nov. 
1919, Aug. 



1917 



27 1917, Oct Detroit 



City or state ' 



Philadelphia 

Philadelphia 

Philadelphia 

Detroit 

Wisconsin 

Massachusetts 

Boston 

Boston 

New York City 



New York City 



New York State 

New York State 
Ohio 
Ohio 
Rochester, N. Y. 



Cleveland, O. 



No. of 
dealers 



1 
1 

1 
28 

80 
Several 

20 small 



1 

(Borden) 



26 

12 
1 

1 (same) 
All 



All 



1 



Remarks 



All bottled 
Retail 



f On routes 

■i To retail stores 
j At company stores 
I Wholesale bulk 

Empire State 

Clover Leaf 

Mutual McD 

Alex Campbell 

Borden^ 

All business 

Retail only 



f Retail bottled 
] Wholesale bottled 
( Wholesale can 

All milk 

Retail bottled 



Several Retail bottled 



Cost of distribution 



Trans- 
porta- 
tion, 
cents 



52 



844 

844 
844 
844 



553 
553 
553 



Process- 
ing, 
cents 



-.946 

1.172 

.758 

1.564 

.928 
2.242 

2.242 
2.242 
1.444 



Delivery, 
cents 



1.193 
1.541 
1.528 
2.926 

1.211 
3.761 

2.757 
2.678 

.774 



Table XXV 
Cost of Distribution, Eighty Plants, Massachusetts {1916) Classified According to 

Size of Business ^ 





No. quarts sold daily 




Under $00 quarts 
27 


Soo to 1,000 


7,000 to 2,000 


Over 2,000 


No. of establishments 


20 


10 


3 


Expense per quart:.. . . 

Preparation 

Delivery 


cents 

.65 
1. 14 

•25 


cents 

.46 
.89 
.29 


cents 

•45 

1.05 

.32 


cents 

.67 

1-35 

•47 


Overhead 




Total expense 


2.04 


1.64 


1.82 


2.49 



* Massachusetts Agri. Exp. Station Bui. 173 (1917), p. 17. 



DISTRIBUTION OF MILK 



127 



XXIV 

and Charged, and Profits or Losses in the Milk Business 



per quart 


Price 


Selling 


Profit 










Over- 
head, 


Total 
cost, 


paid pro- 
ducer. 


price, 
cents 


or 
loss. 


Where reported 


cents 


cents 


cents 




cents 






3.43 


3.71 


7.80 


+ .14 
+ .20 
+ .14 


Pa. Pub. Com., File No. 357, p. 40 

Ibid. 

Ibid. 


.309 


2.447 








U. S. Dept. Agr. Bui. 639, p. 24 




3.202 


3.276 






Wis. Bui. 285, p. 47 


.492 


2.790 








Mass. Exp. Sta. Bui. 173, p. 14 


.494 


5.612 


4.498 


16.421 


+ .311 


Milk Question in New England, Boston 
Ch. of Commerce, p. 46 


.494 


2.633 








Ibid., p. 55 


.171 


7.018 


7.425 


14. 


— .443 


Report of Mayor's Committee on Milk, 
N. Y., p. 62 


.171 


6.014 


7.425 


13. 


— .439 


Ibid. 


.171 


5.935 


7.425 


14. 


+ .640 


Ibid. 


.051 


3.113 


7.425 


10. 


— .538 


Ibid. 




3.192 


5.627 


8.680 


— .139 


Ibid., p. 58 




3.483 


5.645 


8.855 


— .273 


Ibid. 




3. 549 


5.198 


8.322 


— .425 


Ibid. 




3.605 


5.782 


11.628 


+ .241 


Ibid. 




4.761 


4.568 


9.314 


— .015 


Ibid. 




3.366 


8.945 


13.707 


+1.396 


Foods &• Markets, Sept., 1919, p. 15, 
N. Y. State Dept. of Fanns & Markets 




4.941 


9.376 


15.112 


+ .795 






7.810 








Ibid., p. 17 




8.436 












6.359 
4.361 
3.979 


7.255 
7.255 
7.255 


13.538 
11.289 
10.777 


— .076 

— .327 

— .457 


iMilk Survey of City of Rochester, 
' New York, p. 159 




5.796 








ibid., p. 154 




6.251 


4.949 




— .335 


Report to Fed. Milk Commission for 
Ohio, spring, 1918 




6.24 








Mich. Agr. Col. Special Bui. 99, p. 28 



Table XXVI 

Weighted Average Cost of Handling at the Plant — Twenty-eight Detroit Dealers 
{igif), Classified According to Size of Business ^ 





No. of quarts sold daily 




Under $00 


500 to 1,000 


1,000 to 2,000 


2,000 or 

over 


Plants in group 


S 


6 


7 


10 


Average plant cost. . . . 


cents 
1. 491 


cents 
1.248 


cents 
■905 s 


cents 
■7995 



1 Based on Table XXII. 



128 



THE MARKETING OF WHOLE MILK 



Table XXVII 

Weighted Average Cost of Delivery, Twenty-seven Detroit Dealers {1Q15), Classified 

According to Number of Delivery Wagons ^ 





Number of wagons per dealer 




Under 5 


5 to 15 


15 or over 


Number of dealers 


17 


7 


T. 






Amount delivered daily 


14,660 


33,794 


50,248 




Cost of delivery per quart. 


cents 
1-394 


cents 
1.282 


cents 
1. 510 





Table XXVIII 

Weighted Average Cost of Delivery of Twenty-seven Detroit Dealers {igis). Clas- 
sified According to Size of Load Delivered 





Size of Load 




Under 300 
quarts 


300 to 500 
quarts 


500 quarts 
or more 


No. of dealers 


7 


17 


3 


Quarts delivered daily 


8,359 


80,673 


9,670 




Cost of delivery per quart. 


cents 
2.024 


cents 
1.368 


cents 




1.273 



Table XXIX 

Cost of Labor fer Quart of Milk in the City of Rochester, New York, for 134. Dealers 

Grouped According to Size of Business ^ 



Size of business 


Quarts received daily 


All dealers 




Under 500 


500 to 1,000 


1,000 and over 


Labor cost per quart 


cents 
2.394 


cents 
2.016 


cents 
2.716 


cents 
2.471 



Calculated from Table XXIII. 2 ^Hk Survey of the City of Rochester, p. 1 16. 



DISTRIBUTION OF MILK 129 

Moreover, there is difficulty in ascertaining the true 
cost of delivering a quart of milk because of the fact that 
almost every dealer does a mixed business. Each delivers 
bottled milk at retail and at wholesale and usually some 
in cans. Each is likely to deliver cream in bottles at the 
homes or in cans to restaurants, etc. Then there is also 
the question of relative costs of supplying single pints or 
quarts. It costs more to deliver a gallon of milk in pint 
bottles than in quart bottles. It is hard to say how much 
more. It often happens that the same wagons in certain 
sections of a city perform all these services. Here, then, 
we have the problem of joint costs in all its complexities, 
and this problem the investigators in various cities have 
met in different ways, and hence for this reason alone 
cost figures would vary. 

Section 10. Development of the Present System of 
Distribution 

The present system of distribution is the result of de- 
velopment — not of retrogression. Our milk dealers have 
seen the advantages to be gained from the use of modern 
equipment, but have found that such equipment can be 
used profitably only with large volume of business. By 
the use of modern methods, which have often resulted in 
lower operating costs, and by putting on the market 
a superior, well-advertised article, the larger dealers 
have been able to take over more and more of the 
business. Instances of this have already been pointed 
out. 

There is undoubtedly still much inefficiency in the milk 
business and a great deal of waste from duplication of 
effort and equipment, but conditions are certainly better 



I30 THE MARKETING OF WHOLE MILK 

than they were. The leading dealers in many of our cities 
have made every possible attempt to conduct the business 
more economically, since it was only by so doing that 
they could meet the competition of the small, independent 
dealers and the producer-distributors and still be enabled 
to make a profit. As a result of the efforts of the more 
progressive dealers and producer-distributors, as well as 
of our health authorities, we are undoubtedly getting a 
better quality of milk than formerly in spite of the 
fact that it comes from more widely scattered sec- 
tions. 

Reference has already been made to the fact that there 
has been a notable tendency towards centralization, which 
in various instances has brought about considerable sav- 
ings. As a result of numerous studies of milk distribution 
the feeling has come to be quite prevalent that the present 
wasteful competitive system of milk distribution should 
be superseded entirely by a centralized distributive system. 
The most elaborate study along this line is that made in 
1 91 9 by Dr. Charles E. North in Rochester, New York, 
for the Committee on Public Safety of the Rochester 
Common Council. The work of a large number of assist- 
ants, milk inspectors, public accountants, and others, 
after several months' effort, resulted in the collection of 
a mass of data dealing with the milk problem in Rochester 
and in several other cities. Many of the data have been 
published in an attempt to show the possible savings that 
would result were Rochester's milk business efficiently 
operated as a single system instead of under the present 
competitive plan. This phase of the study is summarized 
in Table XXX. 



DISTRIBUTION OF MILK 

Table XXX 
Final Summary of Estimated Savings Under Centralized System 



131 





Under present 
system 


Estimated under 
centralized system 


Estimated 
savings 




Unit cost 

per qt. 

sold 


Total 
yearly 
costs 


Unit cost 

per qt. 

sold 


Total 
yearly 
costs 


Unit 
savings 
per qt. 
sold 


Total 
yearly 
savings 


Freight or trucking . 
Labor 


.005855 
.025812 

.022056 
.004237 


$ 165,805 
730,925 

624,548 
1 19,976 


.005270 
.014062 

.014464 
.003500 


$ 149.225 
398,190 

409,572 
99,118 


.000585 
.GI1750 

■ 007592 
.GG0737 


$ 16,580 
332,735 

214,976 
20,858 


Factory, other than 
labor 


Loss on surplus. . . . 


Totals 


.057960 


^1,641,254 


.037296 


$1,056,105 


. 020664 


^585,149 



According to this table there would be a saving of about 
two cents per quart or 37.5 per cent of the cost of dis- 
tribution as it was carried on in August, 191 9. This would 
amount to a saving for the consumer of 14.8 per cent on 
his milk bill with milk selling at 1372 cents. 

The United States Bureau of Markets, in September, 
1 91 8, made a survey of milk marketing conditions in Kan- 
sas City in which this phase of the milk problem received 
attention. Table XXXI compares the cost of the present 
system in Kansas City with the probable cost of a central- 
ized system. It will be noticed that the figures indicate a 
probable saving of six cents per gallon on the cost of dis- 
tribution, reducing that cost from 14 to 8 cents per gallon. 
This is equivalent to a saving of 42.8 per cent of the costs 
obtaining in September, 191 8, or a saving to the consumer 
of about 10 per cent, with retail prices ranging from 14 
to 15 cents a quart. 

1 Milk Survey of the City of Rochester, p. 154. 



132 



THE MARKETING OF WHOLE MILK 



Table XXXI 

Comparative Estimate on Monthly Basis of Operating Costs Under Present 
Conditions and Centralized Plan ^ 





Present conditions 


Centralized plan 




No. of each item 


Amounts 


No. of each item 


Amounts 


Rents 


(estimated) 171 
171 
6% of $672,450 
694 X $ 60 
351 X $ 40-00 
152 X $ 10.00 
104 X $100.00 
171 reported 
171 

(estimated) 171 
171 
171 
171 
171 
171 
io%of$672,45o 
(estimated) 171 
171 


$ 3,870 

5,630 

3,362 

41,640 

14,040 

1,520 

10,400 

2,047 

1,662 

1,630 
1,080 

2,565 
3,680 
6,020 
1,620 
560 
1,710 
6,000 


I X $350 

I X $500 
6% of $500,000 
350 X $125 
150 X $40 
100 X $10 
60 X $60 
I X $500 
Vioofi%of 
$400,000 
I 
I 
I 
I 
ammonia 
I 
I 
I 
I 


$ 35° 

■500 

2,500 

43,750 

6,000 

1,000 

3,600 

500 


Managerial expense 

Interest charge. . 


Employee expense 

Horse maintenance 

Wagon maintenance 

Truck maintenance 

Bottle loss 


Credit loss 


Water expense 


400 

350 

1,080 


Cap expense 


Processing incidentals 

Coal & power expenses. . . . 
Ice expense 


1,000 

2,500 

100 


Repairs 


1,000 


Depreciation 


450 

1,000 


Advertising 


All others 


3,000 




Total.. 


$108,032 
I4(Z^ per 
gallon 




$69,080 
SjZ^per 
gallon 





These are the conditions existing and the alleged pos- 
sibilities. Who is to blame for the conditions? The public 
demands competition and becomes suspicious at mere 
size and complains at the least evidence of a milk trust. 
Undoubtedly economies would result, were an efficient 
centralized system established. But would they be as 

^ Milk Marketing Conditions in Kansas City, Sept., 1918, U. S. Bureau of 
Markets, unpublished report. 



DISTRIBUTION OF MILK 133 

great as above indicated? Might not the abolition of the 
competitive system also remove the incentive for each to 
do his best which at present leads to constant improve- 
ment? Will the public take advantage of such possi- 
bilities as exist? Does it care to pay the price of making 
such a saving? By what means are such savings to be 
attained? These questions will be further considered in 
Chapter VII. 



CHAPTER V 

COLLECTIVE BARGAINING IN THE MARKETING OF WHOLE 

MILK 

Section i. Development of Collective Bargaining 

The idea of collective bargaining developed as a result 
of the introduction of the factory system of manufacturing, 
under which large numbers of laborers came to feel the. 
need for united action in holding their own against the 
few controlling vast accumulations of capital. Under 
open competition as it then existed, the individual labor- 
ing man was an extremely weak bargainer in dealing with 
a big employer, and the laborer came to have altogether 
too small a share of the product of his industry. 

Collective bargaining as we know it to-day has been 
defined as "a process by which the general labor contract 
is agreed upon by negotiation directly between employer 
or employers* associations and organized working men." ^ 
In some instances the bargaining is between an employer 
and his own workmen. In other instances it is between 
a group of employers and a combination of the working 
men of all of them, as in the case of the coal mining indus- 
try. The fundamental principle back of collective bargain- 
ing is "the substitution of the indispensable group as a 
bargaining unit for the dispensable individual.*' ^ 

From the first collective bargaining was considered op- 
posed to the public good and was dealt with accordingly. 

^ Report of Industrial Commission, Vol. XVII, p. 834 (1900). 
* Carver, T. N., Principles of Political Economy, p. 403 (1919). 

134 



COLLECTIVE BARGAINING 135 

Under English common law it was held that whereas sev- 
eral men might individually demand higher wages, the 
moment they agreed among themselves to demand such 
higher wages or a change in hours, they were conspiring 
to interfere with the rights of third parties. This is the 
attitude which courts both in England and in America 
have taken almost to the present time. In 1824 and 1825 
English laboring men were given the right to bargain col- 
lectively provided their agreements applied only to hours 
and wages of men directly involved. A half century later, 
in 1 875, English laborers secured a considerable concession 
in the passage of the Trade Union Act, which provided 
that no action committed by a group of workmen was 
punishable unless the same act was criminal if committed 
by a single individual. In the United States the legal 
status of labor organizations late in the last century is 
thus described by the Industrial Commission: "The 
position of labor organizations under statute law and 
court decisions is a somewhat uncertain and anomalous 
one. Their powers and responsibilities are not clearly 
defined and are probably not very great." ^ It was not 
until 1 9 14 that labor organizations were clearly given the 
right of collective bargaining in the passage of the Clayton 
Amendment to the Sherman Anti-Trust Law. 

Collective bargaining on a large scale in agriculture is 
of much more recent origin than in industry, and it is now 
passing through a struggle to acquire a satisfactory legal 
status very similar to the earlier struggle of the labor 
unions for recognition. If one scans history, occasional 
early attempts at collective bargaining in agriculture are 
doubtless to be found. For example, following the Black 
Death in southern England, just after the middle of the 

1 Report of Industrial Commission, Vol. XXIII. 



136 THE MARKETING OF WHOLE MILK 

fourteenth century, there were combinations of agricul- 
tural laborers demanding higher wages and probably also 
of villiens demanding lower rents. ^ 

The granger movement in the United States beginning 
in the late sixties was a most ambitious attempt to secure 
by collective action economic opportunity apparently not 
available to the individual farmers acting alone. The 
grangers proposed to deal collectively with large manufac- 
turers so as to get cheaper or otherwise more satisfactory 
service, and actually succeeded in accomplishing this in 
many instances. Other organizations in various parts of 
the country have followed along lines very similar to those 
laid out by the early grangers. It is in the milk business 
that collective bargaining on the part of farmers has 
taken a form most nearly comparable with its form in the 
industrial field. 

With the development of our large cities and the conse- 
quently increasing separation of the producers and con- 
sumers of milk, and with the concentration of the milk 
business of the cities in the hands of relatively few large 
dealers, the position of the milk producer has come to be 
very similar to that of the individual laborer. Along with 
these changes has come the modern demand for a sanitary 
milk, in the production of which larger and larger amounts 
of specialized capital are required. The modern dairyman 
supplying fresh milk for direct consumption must have 
a herd of high producing, often tuberculin tested cows, 
a well-equipped, sanitary barn, and usually a milk house 
furnished with cooling and cleaning facilities of modern 
type. Frequently milking machines are used for the milk- 
ing. All of this means that the modern dairyman has a 
very heavy investment in a kind of capital so highly spe- 

^ Cheney, E. P., Industrial and Social History oj England, p. 105. 



COLLECTIVE BARGAINING 137 

cialized as to be suited only for this particular purpose. 
Thus it is difficult and expensive to shift to some other 
line of work in case milk production does not for a time 
appear profitable. 

There is often no alternative outlet for milk which will 
adequately repay the use of the equipment installed for 
the purpose of supplying milk for city use, since, as al- 
ready pointed out (Chapter III, Section 2; Chapter IV, 
Section 8); milk for the various alternative uses usually 
commands a lower price. ^ Even though producers were 
content with the lower prices offered by these competing 
demands, facilities for making such demands effective are 
often lacking in the milk-producing areas about our large 
cities, except in so far as the large dealers have equipped 
themselves to utilize their own surplus to the best ad- 
vantage. 

In addition to the above mentioned weakness of the 
individual dairyman as a bargainer, there is the fact that 
his product must be sold quickly and regularly. Milk 
cannot be allowed to accumulate. Nor can production be 
halted by even a few days while a new market is being 
sought or satisfactory prices being arranged. Each day's 
milk must be delivered to the consumer as quickly as pos- 

^ The U. S. Bureau of Markets reported average monthly net prices to pro- 
ducers supplying milk for different uses during 1919 as follows: 

Milk for city distribution, per cwt ^3 • 5° 

Cheese manufacturing (average net price approximated by multiplying 
Plymouth, Wis., cheese board price of twins by 10 and adding 15^ as 
compensation for value of whey), per cwt 3 04 

Butter manufacturing (average net price approximated by multiplying 
the average monthly quotation of 92 score butter on the New York 
market plus 3P by the basic butterfat content of 3.5 per cent milk and 
adding 75(2 as compensation for the skim milk used on the farm) 2 . 98 

Milk for condensing, per cwt 2.91 

Market Reporter, April 17, 1920, p. 253. 



138 THE MARKETING OF WHOLE MILK 

sible, or be converted into some one of the more durable 
milk products. 

Under these conditions the individual farmer is often 
at a disadvantage in marketing his milk. An unscrupu- 
lous dealer may tell him, during a flush season, that he 
can no longer use the dairyman's milk, since he can get 
cheaper milk from some other section, probably a section 
farther out from the city. Such a dealer could easily drop 
a few individual producers. Rather than be forced to look 
for a new market, such producers, acting individually, 
would very likely accept the low price offered. Thus 
dealers could undoubtedly, by playing one section against 
another, keep prices of milk at unduly low levels. 

Section 2. Historical Sketch of Collective Bargaining in 
the Sale of Milk 

Organization among milk producers has existed for 
approximately forty years. The organizations range from 
local groups of farmers held together by mutual grievances 
or ambitions of a more or less temporary character to 
associations including thousands of members. For the 
most part, as interest in the particular problems which 
had brought the members together died out, the various 
groups either disbanded or were represented for a time 
by mere handfuls of men. They paved the way, however, 
for wider organization, and in the middle and late nineties 
a number of producers' associations of a more permanent 
and more ambitious character made their appearance 
throughout the eastern and middle western dairy states. 
These, in turn, have led, more or less directly, to the 
formation of present day organizations. 

In New York State the first definite action towards 



COLLECTIVE BARGAINING 139 

collective bargaining by milk producers occurred in March, 
1883, among the farmers of Orange County who were 
shipping milk to New York City. Many of the city milk 
dealers, the farmers claimed, lowered the price paid the 
producers whenever they could, or they did not pay for 
what they bought. The farmers, eight hundred of whom 
had formed an association, and the dealers met late in 
February, 1883, to decide upon the price of milk.^ The 
dealers were paying three cents per quart at the depots 
along the railroads for milk which retailed in the city at 
ten cents. The dairymen demanded three and a half cents.^ 
Since no agreement could be reached, the producers held 
a general mass meeting and passed a resolution that all 
milk should stop the next night. Accordingly 104,000 
quarts were held back voluntarily,^ and organized groups 
of men emptied the milk from the cans of those who at- 
tempted to ship to New York.^ After three days of this 
warfare, the farmers secured nearly all of the increase 
demanded. They were able to maintain the price for 
their milk throughout the remainder of the year and the 
first six months of 1884. This association was still in exist- 
ence in 1887,^ but the need for wider organization was 
coming to be felt. Plans were generally discussed for 
the building of cooperative milk plants and creameries 
which would take care of the surplus and thus, in prevent- 
ing the flooding of the market, keep up the price of milk.^ 
To make this plan effective it was necessary to unite pro- 
ducers in the five states from which New York City re- 

^ Report of N. Y. Dairy Association meeting for 1885. 

2 Cultivator y Country Gentleman, Mar. 29, 1883. 

' Report of N. Y. Dairy Association meeting for 1885. 

* Cultivator and Country Gentleman, Mar. 29, 1883. 
^ Ibid., June 30, 1887. 

• Rural New Yorker, Feb. 25, 1888. 



I40 THE MARKETING OF WHOLE MILK 

ceived most of its supply, — New York, New Jersey, Con- 
neticut, Massachusetts, and Pennsylvania, — and early 
in 1889 an organization later known as the Five States 
Milk Producers' Union was formed in Oxford, Chenango 
County, New York.^ In October of the same year three 
hundred farmers met at Middletown, Orange County, to 
further plans for organizing branch unions on all railroads 
shipping milk to Greater New York,^ Ten thousand pro- 
ducers were supplying the city of New York at that time, 
and these, it was claimed, because of lack of organization, 
were helpless in the hands of about one hundred organized 
dealers. The ultimate object of the association was the 
formation of a cooperative stock company capitalized at 
about $500,000 to furnish milk direct to consumers, a plan 
said to have been in successful operation in London at 
that time for nineteen years. ^ The farmers were to take 
a twenty-five dollar share for each can of milk of forty 
quarts furnished daily. An agent at each shipping point 
was to receive and forward the milk and cream to a cen- 
tral depot just outside New York City.* This ambitious 
plan, however, was not be to taken up until extensive 
organization of local unions had been effected, and this 
organization required time. The work of the producers' 
union was not spectacular, but it accomplished a great 
deal in uniting scattered farmers and acting as an agent 
through which their claims might be stated and pressed 
in dealing with the Milk Exchange. Late in 1891, for 
example, the union won a case in which it charged the 
New York Milk Exchange with being a combination 

^ Cultivator and Country Gentleman, Oct. 31, 1889. 
^Ibid., Oct. 24, 1889; Ibid., Oct. 3, 1889. 
^ Ibid., Oct. 31, 1889. 
< Ibid. 



COLLECTIVE BARGAINING 141 

which had "unlawfully assumed to control the milk mar- 
ket by arbitrarily jfixing prices and other means to the 
detriment of the producers and consumers." ^ The activi- 
ties of the union were confined principally to the organi- 
zation of locals for some years after this. 

The union was still in existence in 1897 ^ when excite- 
ment over a gigantic milk trust said to be forming in New 
York ^ gave fresh impetus to activity among the milk pro- 
ducers and resulted in 1898 in the formation of the Five 
States Milk Producers' Association ^ which before the end 
of that year attained a membership of 3,715 producers. '^ 
The building of local creameries was urged as a means 
of combating the city dealers.^ In 1899 the association 
numbered eight thousand members, representing owner- 
ship of two hundred thousand cows,'^ and controlling 
twenty thousand of the twenty-five thousand cans of milk 
daily shipped to New York City.^ 

A big contract was made with The Consolidated Milk 
Company, which was to purchase the milk from the as- 
sociation at a higher price than the dealers' organization 
would pay,^ but this company failed to live up to its con- 
tract, ^° and the producers were compelled to make terms 
with the milk dealers. That such terms were not satis- 
factory to the former is evidenced by the unrest among 

^ Cultivator and Country Gentleman., Oct. 15, 1891. 
2 Ohio Farmer, Dec. 23, 1897. 
^ Hoard's Dairyman, Sept. 24, 1897; Mar. 4, 1898. 

* Cultivator and Country Gentleman, Mar. 24, 1898; New York Produce RevieWt 
July 3, 1901. 

6 Ibid., Oct. 27, 1898. 
^Ibid. 

' New York Pro. Rev. & American Creamery, Mar. 29, 1899. 
^ Hoard's Dairyman, June 6, 1919. 
9 Ibid. 
" Ibid., Apr. 14, 1899. 



142 THE MARKETING OF WHOLE MILK 

them during the next few years, an unrest expressed in 
schemes to sell their milk to cheese and butter factories ^ 
and in negotiations with rival distributing agencies in the 
city.2 A result of this unrest was the impetus given to 
the organization of cooperative stock companies and the 
building of creameries. Largely through the pressure 
brought to bear by the Five States Milk Producers As- 
sociation, in the summer of 1900 the producers received an 
increase in the price paid them for milk of one-eighth 
of a cent per quart.^ This increase, though small, at least 
admitted the association as an element to be consulted in 
determining milk prices. Later the association attempted 
to establish a schedule of prices which the members must 
be paid for their product, but the milk exchange failed 
to comply with such a schedule, and constant warfare 
resulted between the two organizations.^ More and 
more creameries continued to appear throughout the 
region supplying milk to New York. By 1903 the Five 
States Milk Producers' Association, through its members, 
was controlling nearly one hundred and fifty cooperative 
creameries,^ and early in that year "the cooperative 
creameries, corporations, and associations supplying milk 
to Greater New York and neighboring cities" formed 
themselves into a "Cooperative Creameries Association," 
of which the purpose was, so the resolution read, "to bring 
in close touch all cooperative creameries, in order that by 
united effort we may hasten the accomplishment of the 
work undertaken by the Five States Milk Producers' 

^ New York Produce Review y Jmerican Creamery, Mar. 21, 1900; Ibid., 
July 25, 1900. 

2 Ibid., May 23, 1900. 

^ Ibid., July 18, 1900. 

* Ibid., July 3, 1901. 

' Hoard's Dairyman, Apr. 24, 1903. 



COLLECTIVE BARGAINING 143 

Association to secure uniform and remunerative prices 
for our milk." ^ This association cooperated closely with 
the Five States Milk Producers' Association, of which in 
fact it was really a branch. 

In the summer of 1903 the Five States Association con- 
trolled about half the milk coming into the city of New 
York,2 and an ambitious scheme gained favor about that 
time by which the entire milk supply controlled by the 
association was to be handled by the Peoples' Pure Milk 
Company, a $25,000,000 corporation, from which the 
farmers were to receive an increased price for their milk 
the year round. This plan failed, however, because the 
corporation was financially unable to meet the contract 
made with the sales committee of the association. ^ Several 
other attempts were made at various times to market the 
milk of the association members through some one large 
agency, but these efforts also failed, and interest in the 
association waned. By 1907 the meetings were unattended 
except by a mere handful of men, composed chiefly of the 
executive committee, and the organization was practically 
dead.^ It had accomplished a great deal in educating the 
producers to organize and in hastening the building of 
cooperative creameries throughout the territory of its 
control. 

About this time a new organization appeared in the 
territory supplying milk for the New York City market, 
namely, the Dairymen's League, which had a healthy 
start in a meeting of about seven hundred milk producers 
held at Middletown, New York, August 24, 1907.^ The 

^ New York Produce Review y American Creamery, Apr. i, 1903. 
- Ibid., July 22, 1903. 

* Ibid., Oct. 14, 1903. 

^ Hoard's Dairyman, Mar. 8, 1907. 

* Rural New Yorker, Sept. 7, 1907. 



144 THE MARKETING OF WHOLE MILK 

league was incorporated under the laws of New Jersey, 
and included members from New Jersey, Pennsylvania, 
Vermont, Connecticut, Massachusetts, and New York, 
representing the ownership of fifty thousand cows.^ The 
growth of the organization, though fairly steady, was slow. 
During 191 5 there was no active organization because 
the league was unable to secure enough new names to pay 
organizers' expenses, but in the summer of 191 6 there was 
a great revival of interest among the milk producers, and 
many new members joined the association. The league 
planned to be the agent, throuh a committee, for the sale 
of the milk of its members and to organize local branches 
at any point where there was a condensery, creamery, 
or shipping station. In September and October, 1916, the 
league won a boycott which it conducted against the milk 
dealers. 2 By April, 191 7, the league numbered 40,420 
members, organized into 791 local unions and represent- 
ing the ownership of 493,848 cows.^ The present status 
of the Dairymen's League is discussed elsewhere. 

The Boston Milk Producers' Union was organized 
about 1886.^ For some years it was said to be fairly suc- 
cessful in maintaining the price of milk in face of a decline 
of prices for other farm products, and consequently milk 
production increased, causing in turn an increased surplus. 
About 1897 the surplus question, which had long been a 
source of contention, began to loom very large. 

In 1 901 the producers' union had promoted uniformity 
of prices and business-like methods. ^ It had even at- 

* Prelim. Rept. of N. Y. State Legislature Joint Committee on Dairy Products^ 
Livestock & Poultry, 1917, pp. 295-339. 

2 Ibid. 

' New York Produce Review y American Creamery, May 30, 1917. 

* Rept. of U. S. Industrial Commission, Vol. VI, p. 407. 
^ Ibid., p. 408. 



COLLECTIVE BARGAINING 145 

tempted to dictate prices, which were to be determined 
by a rather unique method. Blanks were sent to producers, 
who thereon estimated prices wanted and amount of milk 
to be shipped. These prices were then averaged on the 
basis of number of cans to be shipped. ^ The union at that 
time had the machinery for a strike, but a strike had not 
so far been necessary, although several threats had been 
made. 2 

In the fall of 1903 the Milk Producers' Union was said 
to control five-sixths of the entire milk supply within one 
hundred miles of Boston.^ About this time argument 
over the surplus question became very bitter, and the 
producers repeatedly threatened to strike if their demands 
were not met.^ The milk dealers were willing to arbitrate 
on the question of price, but not on the question of sur- 
plus. According to the surplus clause of the contract 
which the producers were asked to sign, the dealers bought 
the producers' milk in an unlimited quantity and used the 
surplus for the manufacture of butter. The farmers then 
received butter prices for such surplus. The difficulty 
was that the farmer never knew for what part of his prod- 
uct he was to receive the milk price, and for what part 
the butter price.^ A further clause in the contract be- 
tween the producers and the milk dealers read: "If any 
producer produces in any one month less than one-half 
the quantity that he delivers in the largest preceding 
month, that difference between one-half and the amount 
delivered shall be figured per can at the difference be- 
tween the card price and the butter value of the milk, and 

^ Rept. of U. S. Industrial Commission, Vol. VI, p. 407. 

2 Ibid. 

^ Nezv York Produce Review \3 American Creamery, Oct. 7, 1903. 

* Ihid., Nov. 18, 1903. 

^ Ihid., May 29, 1901. 



146 THE MARKETING OF WHOLE MILK 

that amount shall be deducted from the monthly bill in 
settlement." ^ This involved method of penalizing the 
producers meant a burdensome fine whenever a milk ship- 
ment fell below one-half the amount shipped in the largest 
preceding month. One shipper, to quote an extreme ex- 
ample, shipped only 71 cans of milk in August, whereas 
he had shipped as many as 444 cans in April. As a conse- 
quence, under this system of penalization, he received a 
check at the end of August for twenty-four cents. ^ The 
controversy of 1903 ended virtually in victory for the pro- 
ducers, since the agreement reached enabled the farmer 
to know before he shipped his product just how much he 
would receive for it and at the same time did away with 
the burdensome penalty clause for shortage in shipments.^ 
In 1904 the Milk Producers' Union changed its name 
to "The New England Milk Producers Association" ^ 
and formulated plans for the formation of an association 
or stock company called the Boston Cooperative Milk 
Producers' Company, which was actually organized in 
the spring of 1904. Each member held one share of stock 
and was required to rate himself reasonably near as to 
the number of cans of milk he could furnish.^ The Boston 
Milk Producers' Company was well supported by the 
farmers for some years, and after its organization there 
seems to be no record of activity by the old union. In 
1910 it was sufficiently strong and active to conduct a 
strike.^ About the end of 191 2 the company was dis- 
solved by court action on charge of having violated the 

^ New York Produce Review ii American Creamery, Nov. i8, 1903. 

2 Ibid. 

' Ibid., Nov. 25, 1903. 

* Ibid., Feb. 3, 1904. 

* Ibid., July, 1904. 

' New England Dairyman, Feb., 1919. 



COLLECTIVE BARGAINING 147 

Sherman Anti-Trust Law.^ In February, 1913, the New- 
England Milk Producers' Association was formed. ^ In 
December, 191 6, a movement was started to extend the 
organization over all New England, with subdivisions 
dealing with other markets than Boston. This movement 
met with considerable success, and after the laws of Mas- 
sachusetts were amended for that purpose, it was incorpo- 
rated as the present organization in June, 1917.^ 

About 1883 the milk producers along some of the main 
lines of railroad running into Philadelphia organized to 
resist the exactions of milk dealers. Soon afterwards 
producers along other roads organized, but, because they 
were not prepared to take care of the surplus, none of 
these organizations were able to withstand the pressure 
brought to bear by the milk dealers.^ For four years no 
further attempt was made by the producers at organizing, 
but in the winter of 1887, when the dealers put the price 
of milk down below cost of production, organizations were 
again formed, and this time upon a basis of cooperation 
which made them sufficiently strong to compel the dealers 
to pay the price or go without milk. Provision was made 
to handle the surplus and maintain price. In each neigh- 
borhood from which milk was shipped, a local organization 
was formed. These along each railroad were formed into 
a general association, which sold milk to dealers and hotels.^ 
It maintained a plant in Philadelphia to which all unsold 
milk was taken and made into butter.^ It attempted to 
pay shippers milk prices for all they produced and pro- 

^ N. H. Extension Bulletin No. 8, p. 42; letter from R. Pattee. 
2 Ibid., No. 8, p. 42. 

* Letter from R. Pattee, managing director N. E. M. P. A., May 10, 1919. 
'^ Rural New Yorker, Aug. 3, 1895. 

6 Ibid. 

* Letter from J. Walter Pancoast, Woodstown, N. J., May 17, 1919. 



148 THE MARKETING OF WHOLE MILK 

rated the loss for that part of the milk worked up into 
butter. 1 High freight and overhead expenses, the lack 
of a good market for skimmed milk, and loss partly due, 
it is claimed, to the watering of milk by producers formed 
an obstacle too great for the United Association, and 
finally the association confiscated one whole month's ship- 
ments of many of its members to pay back losses. After 
that it disintegrated rapidly.^ The dealers, moreover, 
were making a vigorous fight against the union. The 
larger dealers bought or established creameries and butter 
factories in various sections of western Pennsylvania and 
central and western New York, thus reaching out for 
their supply beyond the territory controlled by the as- 
sociation. The introduction of so-called "foreign" milk 
into Philadelphia was a factor for many years in depressing 
the price to the producers. The organization was strongest 
from 1890 to 1895 ^ and the New Jersey branch of the 
organization lasted until after the formation of the Phila- 
delphia Milk Shippers' Union. ^ 

The pioneer movement from which the Milk Shippers' 
Union developed started in New Jersey about 1896. The 
Union was organized on a small scale about 1898,^ but was 
not strong nor especially active for some years. Indeed 
the Report of the United States Industrial Commission 
for 1900 makes the statement that the Philadelphia milk 
producers were unorganized at that time.^ By December, 
1904, however, the Milk Shippers' Union included nearly 
all the leading shippers of milk to the Philadelphia mar- 

^ Letter from J. Walter Pancoast, Woodstown, N. J., May 17, 1919. 

2 Ibid. 

^ Rural New Yorker, Aug. 3, 1895. » 

* Letter from J. Walter Pancoast. 
6 Ibid. 

* Report of Commission, Vol. VI, p. 390. 



COLLECTIVE BARGAINING 149 

ket.i The union existed at least nominally until the organ- 
ization of the Inter-State Milk Producers' Association in 
1 91 6, at which time the old association turned over its 
activities to the new organization.^ 

The Inter-State Milk Producers' Association was in- 
corporated in Delaware in 191 7, and in 1919 numbered 
about 8,500 members grouped into 156 local organizations 
and controlling about 70 per cent of the milk supply of 
the Philadelphia district.^ 

A short-lived organization appeared in the Baltimore 
milk district in the early spring of 1899 under the name 
of "United Milk Producers' Association." ^ This associ- 
ation had a large plant located in Baltimore and did a 
very considerable amount of business for about a year 
and a half.^ The plant, however, found strong competi- 
tion in private concerns.^ Its milk shippers were paid a 
higher price for their product than they had ever received 
before, and the consumers paid less for what they received. 
Hence the association was under a heavy financial strain.'^ 
Moreover, whereas 90 per cent of the producers had prom- 
ised lo join the organization, but 50 per cent actually came 
in, and lack of complete cooperation weakened the as- 
sociation.^ In the fall of 1900 the concern passed into 
the hands of a receiver, and reorganization was not ef- 
fected.^ 

Organization about cities farther west was taking place 

^ New York Produce Review y American Creamery, Dec. 7, 1904. 

2 Letter from Robt. W. Balderston, July 24, 1919. 

' Information given. by Sec, Philadelphia Milk Producers' Asso., June, 1919. 

* Hoard's Dairyman, Aug. 3 1, 1900. 
5 Ihid. 

* Ibid., Dec. 7, 1900. 
7 Ibid. 

* Letter from Jos. Hoopes, Belair, Md., July, 1919. 
' Hoard's Dairyman, Dec. 7, 1900. 



I50 THE MARKETING OF WHOLE MILK 

during the same period in which the eastern cities were 
organizing. The Milk Producers' Union, composed of 
producers supplying Cleveland, was organized in 1887,^ 
mainly for the purpose of bettering its members' market. 
It was still in at least nominal existence at the end of the 
year 1894.2 About 1897 the Northern Ohio Milk Pro- 
ducers' Association was organized to fight for better prices 
for the producers' milk.^ This organization seems to have 
existed continuously until 191 6, when it received added 
impetus and gained many new members. ^ In April, 
1 91 9, it was reorganized and incorporated under the 
name of The Ohio Farmers' Cooperative Milk Com- 
pany.^ 

The first definite eflFort at organization in the Pitts- 
burg region occurred in the spring of 1889, when three 
hundred twenty farmers organized about April i, for 
"protection and mutual aid." ^ The milk dealers fought 
this organization vigorously, however; some of the mem- 
bers weakened; lack of unity existed in the organization; 
and in May of the same year it broke up entirely- On the 
7th of September, 1894,'^ the milk shippers supplying milk 
to Pittsburg from the sections lying near the Panhandle 
railroad met to organize for "protection and regulation 
of wholesale milk prices in Pittsburg."^ On October i, 
this new organization held a meeting at Pittsburg to 

^ Cultivator and Country Gentleman, Sept. 23, 1887. 
2 Ohio Farmer, Dec. 20, 1894. 

^ Letter from W. H. Ingersoll, now pres. Ohio Farmers' Coop. Milk Co., 
Apr. 19, 1919. 

* Letter from Z. A. Kent, Aurora, Ohio. 

^ Letter from H. W. Ingersoll. "* 

^ National Stockman y Farmer, Apr. 18, 1889. 

' Ibid., Sept. 27, 1894. 

8 Ibid. 



COLLECTIVE BARGAINING 151 

which were invited shippers on all railroads leading to 
the city.^ A broader organization was formed composed 
of shippers from "western Pennsylvania, Ohio, and West 
Virginia and all localities shipping milk and butter into 
Pittsburg and Allegheny and surrounding boroughs." ^ 
It was agreed to form a central organization composed of 
delegates from locals, — one delegate to every ten shippers.^ 
This organization grew rapidly, and locals were formed 
at almost all shipping points leading to the city.^ The 
organization secured the good will of the milk dealers to 
the extent that the latter stated that they would be glad 
to work in harmony with the shippers' union and would 
even refuse to purchase milk from shippers who refused 
to become members of the association and subject to its 
wholesome regulations.^ In 1903 the Milk Producers' 
Association of Western Pennsylvania and Eastern Ohio, 
probably the same organization, had three hundred mem- 
bers. They planned at this time to place agents at all 
shipping points and an agent in the city of Pittsburg to 
have charge of selling the milk to the dealers. The as- 
sociation required that all milk shipped must be pure.^ 
Nothing much is known of the activities of this group of 
dairymen for a number of years. The Northeastern Ohio 
Milk Producers' Association was organized about the fall 
of 1916.^ The organization of this association in turn 
led, in the summer of 191 8, to the formation of The Dairy- 
men's Cooperative Sales Company, with headquarters 

^ National Stockman y Farmer, Sept. 27, 1894. 

2 Ibid., Oct. II, 1894. 

» Ibid. 

* Ibid., Jan. 17, 1895. 

^ Ibid., Dec. 13, 1894. 

^ New York Produce Review l^ American Creamery, Oct. 7, 1903. 

' Statement of A. W. Place. 



152 THE MARKETING OF WHOLE MILK 

at Youngstown, Ohio. This company is at present active 
in the Pittsburg district. 

The most conspicuous example of early organization 
in the Middle West is that in the Chicago milk district. 
As far back as 1887 an organization called the Milk 
Shippers' Union of the Northwest existed and had pro- 
posed an ambitious scheme for the formation of a great 
company to monopolize the entire milk business of 
Chicago. Any farmer producing one can of milk a day 
was to be entitled to at least one share of stock, and no 
non-producer was allowed to belong to the company. The 
obstacles foreseen by milk dealers, who prophesied failure 
of the plan, proved true. The producers were not pre- 
pared to organize an association sufficiently strong to 
control a territory so vast, shipping milk from so many 
different directions.^ 

The next effort at organization did not come until 1896,2 
when a large number of milk shippers tributary to Chicago 
organized themselves into a union with locals at every 
station, for the purpose of protection against irresponsible 
milk dealers ^ and to promote the mutual interests of milk 
shippers. This association was incorporated as "The 
Milk Shippers' Union." * Towards the beginning of 1900 
the union, taking the stand that tuberculosis does not 
affect the milk of a cow, was active in fighting against 
control in regard to this matter. ^ The Milk Shippers' 
Union was moderately active for about ten years. Its 
activities had largely to do with the setting of prices. A 

1 Rural New Yorker, Sept. 17, 1887. 

2 Letter from W. J. Robinson, Sales Mgr. of the Milk Producers' Coop. 
Marketing Co. 

^ Hoard's Dairyman, April 16, 1897. 

* New York Produce Review, Nov. 24, 1897. 

6 Ibid., Nov. 29, 1899. 



COLLECTIVE BARGAINING 153 

stronger organization, the Milk Producers' Association 
had appeared, however, to carry on the work which 
had first caused the formation of an association, and in 
June, 191 1, the union was dissolved.^ 

The Milk Producers' Association was organized in 1909 
for the purpose of "improving the conditions under which 
milk is produced; improving methods of marketing and 
co-operating therein; standardizing the product; generally- 
doing such other things as may be necessary to improve 
the quality, reduce the cost of production, increase the 
return to the producers, and to do all things necessary 
therefor." ^ The passing of an ordinance requiring that 
all milk brought into the city of Chicago be from tuber- 
culin tested herds or be pasteurized was the immediate 
cause of the formation of the organization. It was able 
to defeat a somewhat drastic tuberculin test measure 
introduced in the legislature, and in 191 1 succeeded in 
getting a law passed denying any city, municipality, or 
corporation the right to demand the tuberculin test. 
There have been numerous price controversies, though 
the companies have usually been the stronger bargainers. 
In the spring of 191 6, however, the farmers demanded 
I1.55 per hundredweight, whereas the dealers were offer- 
ing but $1.33. On April i the producers called a "strike," 
which lasted until April 7, at which time the dealers gave 
in. Considerable milk had been shipped in from outside 
the regular milk district, but the farmers within the dis- 
trict had the situation so well in hand that the dealers 
were compelled to acknowledge defeat. The unusually 
successful outcome of the strike of April gave a great 

^ Milk News, June, 191 1. 

2 Amended By-Laws and Amended Constitution, Milk Producers' Association 
Year Book, 1917. 



IS4 



THE MARKETING OF WHOLE MILK 



impetus to the growth of the organization, and by the 
end of that year about 95 per cent of the shippers of the 
Chicago district were said to have joined.^ 

In 191 6 the association organized the Milk Producers' 
Cooperative Milk Company, discussed elsewhere in this 
chapter. This company did not get into operation, how- 



ever, until 1 91 9. 



The following list of associations with principal market 
centers about which each was organized and approximate 
dates of formation will give a resum6 of the move- 
ment. 



Name 


Principal 
Market 
Center 


Date of 
formation 


A forerunner of Five States Milk Producers' Un. . 


New York City 


1883 


Five States Milk Producers' Union 


" 


1889 


Five States Milk Producers' Association 


" 


1898 


Cooperative Creameries Association 


" 


1903 
1907 
1919 


Dairymen's League 


" 


Dairymen's League Cooperative Association 


« 


Boston Milk Producers' Union 


Boston 


1886 


New England Milk Producers' Association 


1904 


(Only a change of name from the preceding) 






Boston Cooperative Milk Producers' Company . . 


« 


1904 


New England Milk Producers' Association 


" 


1913 


(A new organization. Incorporated on non- 






stock non-profit basis in 1917) 






Scattered associations around Philadelphia 


Philadelphia 


1883 


United Milk Producers' Association 


<( 


1887 


Philadelphia Milk Shippers' Union 


" 


1896 


Interstate Milk Producers' Association 


" 


1916 


United Milk Producers' Association 


Baltimore 


1899 


Milk Producers' Union 


Cleveland 


1887 


Northern Ohio Milk Producers' Association 


1897 


Ohio Farmers' Cooperative Milk Company 




1919 



^ Pacific Dairy Review, Dec. 30, 1916. 



COLLECTIVE BARGAINING 



155 



Name 


Principal 
Market 
Center 


Date of 
formation 


Milk Producers' Union 


Pittsburgh 
Chicago 


1889 

1894 
1916 
1918 
1887 
1896 


Milk Producers' Association of Western Penn- 
sylvania and Eastern Ohio 

Northeastern Ohio Milk Producers' Association. . 

Dairymens' Cooperative Sales Company 

Milk Shippers* Union of the Northwest 

Milk Shippers' Union 


Milk Producers' Association 


1909 
1916 


Milk Producers' Cooperative Milk Company. . . 



Section j. Collective Bargaining in the Milk Business^ 

igig-igzo 

In order to gain information as to the nature and extent 
of present organizations for collective bargaining in the 
sale of milk to distributors, questionnaires were sent to 
eighty-six such organizations. Thirty-eight of these 
questionnaires were returned with more or less complete 
answers. Several more were returned with comments 
indicating that the associations had been merged with 
other organizations or had gone out of existence entirely. 

Although milk producers in some parts of the United 
States have attempted collective bargaining for many 
years, the majority of the present organizations are of 
recent origin. Table XXXII shows the dates of organi- 
zation of thirty-six of the associations replying. 

It should be pointed out, however, that in some in- 
stances the present organizations have merely superseded 
earlier organizations which had existed in the same terri- 
tory and which had failed or whose form was found un- 
suited to present day needs. A study of the price charts 



156 THE MARKETING OF WHOLE MILK 

in the chapter on prices reveals as the reason for the rapid 
increase in the number of organizations between 191 6 
and 1 91 8 the fact that milk prices had lagged behind other 
prices in the rapid ascent growing out of the world war. 

Table XXXII 
Dates of Organization of ThiHy-six Milk Producers' Associations 



Year 


Number of associations formed 


IQ07 


2 


IQI-J 


3 


iQie 


2 


IQ16 


6 


iqi7 


12 


igi8. . . . 


8 


IQIQ 


3 







During the early part of the movement a large number 
of local organizations were formed, many of them in- 
dependent of larger organizations covering the same 
general territory. The writer has the names of a consider- 
able number of such associations scattered over Ohio, 
Michigan, the New England States, and other parts of 
the country, many of which are known to have now merged 
with larger associations. Many others have simply ceased 
to exist, and others are weak and ineffective as bargain- 
ing organizations. 

The milk producers' associations are of two general 
types: first, voluntary associations; and second, incor- 
porated associations or companies. Practically all of the 
smaller associations are of the former type. In the milk 
zones about our large cities, however, most of the as- 
sociations are incorporated. Some of these, as for example 
the New England Milk Producers' Association, the United 
Dairy Association of the state of Washington, the Inland 



COLLECTIVE BARGAINING 157 

Empire Dairymen's Association of eastern Washington 
and Idahoj as well as most of the group in California, are 
incorporated on the non-stock, non-profit plan. Most 
of the eastern and midwestern associations, however, are 
incorporated on the capital stock plan. This is true of 
such leading organizations as the Milwaukee Milk Pro- 
ducers' Association, the Milk Producers' Cooperative 
Marketing Company (Chicago), the Dairymen's League 
(New York), the Dairymen's Cooperative Sales Company 
(Pittsburg), the Inter-State Milk Producers' Associ- 
ation (Philadelphia), and the Twin City Milk Producers' 
Association (Minneapolis and St. Paul). Of thirty-six 
organizations thirty are incorporated and six unincor- 
porated; and of twenty-eight incorporated associations 
eleven are on the non-stock, non-profit basis, and seven- 
teen have capital stock varying from a few thousand to 
five hundred thousand dollars. Stockholding is quite 
frequently based on the number of cows kept. The Dairy- 
men's Cooperative Sales Company, for example, require 
each member to hold at least one share with a par value 
of I2.50 and an additional one-tenth share for each cow 
above ten. A similar arrangement holds with regard to 
the Dairymen's League and the Inter-State Milk Pro- 
ducers' Association. 

In the case of the non-stock association, the member- 
ship fee is also frequently based on the number of cows. 
The United Dairy Association of Washington is organized 
on the basis of ten dollars per cow, with a minimum of 
fifty dollars per member. The New England Milk Pro- 
ducers' Association, however, has a membership fee of 
but one dollar. The voluntary associations, as a rule, 
have nominal fees of about one dollar. 

The larger associations are ordinarily composed of 



iS8 THE MARKETING OF WHOLE MILK 

locals, so as to facilitate expression of opinion in the han- 
dling of local problems. Eighteen associations report no 
locals. Fifteen report locals varying in number from 
3 to 1,097, the latter being the number reported by the 
Dairymen's League. Since this association covers the 
large milk shed of New York City, many of its locals, in 
the vicinity of cities like Rochester, New York, are them- 
selves associations of considerable size. 

A number of associations have undertaken to solve 
the surplus problem by the acquisition of plants in which 
to manufacture the various dairy products. The Twin 
City Milk Producers' Association has twelve such plants, 
most of which are country creameries or cheese factories. 
The Milwaukee Association has such a plant; the Pro- 
ducers' Cooperative Marketing Company of Chicago has 
three; the New England Milk Producers' Association has 
only recently taken over the Turner Center System; and 
a number of the western associations have acquired or 
built creameries or manufacturing plants for the utilization 
of their surplus. Among the California associations, for 
example, the Northern California Milk Producers' As- 
sociation operates three plants. One of these, located in 
Sacramento, is equipped for the manufacture of casein, 
powdered milk, condensed milk, cheese, butter, and other 
by-products. The Milk Producers' Association of Cen- 
tral California has a creamery at Stockton and a large 
plant at Modesto equipped for the manufacture of milk 
sugar and dry skim milk.i The Associated Milk Pro- 
ducers of San Francisco have a plant at Holt and are 
erecting another at Los Banos. The San Joaquin Valley 
Association has two or three creameries and contemplates 
building a large manufacturing plant at some point in the 

^ Fourth Annual Report of State Market Director of California, 1920, p. 49. 



COLLECTIVE BARGAINING 159 

San Joaquin Valley. The Imperial Valley Association 
has two creameries and is planning on a large manufactur- 
ing plant. The United Dairy Association of western 
V^ashington has recently taken steps to follow the example 
of the California group, and several of its county organi- 
zations have already acquired plants.^ In the Dairymen's 
League territory elaborate plans are under way for the 
acquisition of the milk manufacturing business through 
the Dairymen's League Cooperative Association, which 
is being fostered by the League. A number of plants have 
been built or acquired under this cooperative association 
plan, the first of which was that at Auburn, New York. 
On April 10, 1920, plants were in operation under this 
plan at Auburn, Fort Plain, Canajoharie, Fonda, Holland 
Patent, Wallkill, and Williamstown, New York.^ In many 
localities in New York farmers' companies have operated 
country plants for some years. One such plant, at Little 
Falls, New York, handled about 13,000,000 pounds of 
milk in 191 9, and during the first eleven months of the 
year accumulated a surplus of 144,000.^ 

Only two associations report any distribution to the 
consumer — the Milk Producers' Cooperative Marketing 
Company (Chicago) and the Midwest Milk Producers' 
Association (Omaha). ^ Each of these is undertaking dis- 
tribution on a small scale in addition to their other ac- 
tivities. A third, the King County Milk Producers' 
Association, a local branch of the United Dairymen's 
Association of Washington, is planning to take up the 
retail distribution in the city of Seattle in the near future.^ 

^ Northwest Dairyman Jff Horticulturist, Mar., 1920, p. 3. 

2 Dairymen's League News, Apr. 10, 1920, p. 10. 

2 Milk News, Jan., 1920, p. 6. 

*The New England Dairymen Association is also distributing some milk. 

^ Northwest Dairyman y Horticulturist, Mar., 1920, p. 3. 



i6o THE MARKETING OF WHOLE MILK 

Of twenty-eight associations which answered the ques- 
tion regarding method found most satisfactory in arriving 
at prices, six stated that cost of production is considered 
or used as a basis; five use one or more dairy products 
having a quoted price as the basis; and fourteen report 
that bargaining with the dealers is found most satisfactory. 
Cost of production, which numerous associations seized 
upon during the war period as a panacea for their price 
difficulties, has been largely given up as a peace price 
determinant. Even of the six above mentioned as giving 
cost of production as the basis for price, several intimated 
that such figures are really used only as the basis for bar- 
gaining. The leaders are apparently coming to see that 
the true function of the association along this line is to 
facilitate the focusing of the forces of supply and demand 
and to make sure that the dairymen get their full share 
of the "bargaining margin." 

The "strike," more properly called a boycott, has fre- 
quently been used as a weapon to enforce demands, usu- 
ally in connection with attempts to secure higher prices 
for milk. At least as early as 1883 dairymen in Orange 
County, New York, made use of the boycott. During the 
period of rapidly rising prices following the outbreak 
of the war in Europe, producers used this method of 
enforcing their demands frequently. There is scarcely a 
large city which has not had one or more strikes within the 
past five or six years. Outstanding examples are the 
Chicago strike of the spring of 191 6, as a result of which 
the producers asked and secured an average of $1.55 per 
hundredweight for the six summer months, after having 
been offered but ^1.33, an increase of 22 cents per hun- 
dredweight. The strike lasted for twelve days. Another 
strike of importance was that in the New York milk zone 



COLLECTIVE BARGAINING i6i 

in August, 1 91 6. Producers were offered ^1.90 per hun- 
dredweight but demanded and received $2.15. 

But boycotts are not by any means always successfuL 
A long drawn out struggle may sometimes end with ques- 
tionable results. In January, 191 9, New York producers 
again boycotted the dealers. After a struggle of about 
twenty-five days, continued at great expense to both 
dealers and producers, most of the dealers finally agreed 
to pay the producers' price for the rest of that month. 
Thereupon the producers claimed a great victory. ^ The 
question may properly be raised, however, as to who 
really won the strike. Both sides lost heavily. The prices 
demanded and the prices obtained are as follows: ^ 

Jan. Feb. Mar. 

Dairymen demanded per cwt $4.01 $3 .86 $3 .54 

Dairymen received after Jan. 25 per cwt 4.01 3 .54 3.31 

The boycott has proved expensive to both producer 
and dealer. Producers can seldom utilize milk to full 
advantage at home for such short periods and often not 
at all. Dealers have to pay high prices for inferior milk 
obtained from distant points, if indeed boards of health 
permit it to be imported at all. A point often overlooked 
is that such a struggle means hardship for the city con- 
sumer. The result is ill feeling towards both distributor 
and producer, which may mean reduced consumption. 

In contracting the prevalent practice is for the pro- 
ducer to contract with the association to consign to it 
all his milk except such portions as are used for home 
consumption. Only two associations report no contract, 
and only six report that the farmer contracts directly with 

^ New England Homestead, Jan. 25, 1919. 

* Creamery £if Milk Plant Monthly, Feb., 1919, p. 24. 



i62 THE MARKETING OF WHOLE MILK 

the dealer. Nineteen report contracts with the association. 
Of fifteen contract forms at hand, one provides for a con- 
tract for one year with no renewal features, two provide 
for a continuous contract with annual periods for its dis- 
continuance, if desired; and twelve are of the self-renew- 
ing type. The following from the contract of the Milk 
Producers' Cooperative Marketing Company of Chicago 
is fairly typical of this latter type: 

"... This contract shall be self-renewing annually for 
periods of one year each, beginning with the first day of 
January, 1921, unless either of the parties hereto shall 
notify the other party on or before thirty days before 
January i in any year of his intention to terminate the 
same on the first day of January following such notice." 

A considerable number of the contracts contain the 
so-called "liquidated damage" clause, by which the pro- 
ducer binds himself to consign his entire output to the 
association for the periods stated and agrees that, in case 
he defaults, the association is to be reimbursed in a certain 
amount previously agreed upon as liquidated damages, 
since the actual amount of damage suffered by the as- 
sociation because of his breach of contract is difficult to 
ascertain. Table XXXIII gives the amounts of such 
liquidated damages and the basis upon which each is 
determined in seventeen associations. 

The securing of adequate revenue has been a serious 
problem with many of the associations. The ordinary 
annual dues do not usually go far. It has been felt that 
expenses should be shared more nearly in accordance with 
the benefits derived from the association. It is difficult, 
however, to collect on the basis of quantity marketed 
when individual members ship their own milk and receive 
their payments direct from the various dealers. To 



COLLECTIVE BARGAINING 163 

overcome this difficulty and to save the expense of col- 
lection, some of the associations have hit upon the plan 
of having the dealer deduct the commission charge from 
the amount due each member and remit the amount of 
such commission in one lump sum each month to the as- 
sociation. In many instances dealers have readily com- 
plied, especially when the associations included a large 
proportion of their patrons. In Milwaukee the large 
dealers now deduct the commissions from the milk checks 
of all their milk patrons, whether such patrons are members 
of the producers' association or not. This is felt to be fair, 
since the non-member shares in any benefits resulting from 
the efforts of the association. 

Table XXXIII 
Basis upon Which Liquidated Damages are Determined in Seventeen Associations 



Basis 


No. of Associations 


4 cents per gallon on outside sales 




50 cents per cwt. of outside sales 




15 per cent of value of outside sales 




10 per cent of value of outside sales 


7 


All amounts due producer at time of violation 

^5 . 00 per cow 


^10.00 per cow 


^35 .00 for failure to live up to contract 




Forfeiture of capital stock owned 









In a number of sections payment for milk is made 
directly to the association. This makes possible prorating 
the returns from milk sold for different purposes and fa- 
cilitates giving all members equal treatment, even though 
some milk must at certain seasons be diverted into chan- 
nels paying less than regular prices. For example, when 
there is a surplus of milk for city use, and a part is tern- 



• 



i64 THE MARKETING OF WHOLE MILK 

porarily diverted to some cheese factory, the patrons 
whose milk is so diverted would suffer a loss. By hav- 
ing all payments made through the association, the 
latter can prorate such losses before making settle- 
ment. 

Commissions charged for selling milk vary in form and 
in amount. Following are the commissions charged their 
members by twenty-one associations: 

Table XXXIV 

Commissions Charged by Twenty-one Associations 



Commission 



No. of associations 



Actual cost 

ij4 cents per lb. of butterfat . 

1% cents per gallon 

I cent per gallon 

}4 cent per gallon 

5 cents per hundredweight. . . 
I cent per hundredweight . . . 

I per cent of sales 

}/i per cent of sales 

I cent per 8 gallon can 

Dues only 



At Chicago, in 191 6, the National Milk Producers' 
Federation was formed, composed of delegates from the 
various milk producers' associations, each of which is 
represented by one delegate having one vote.^ The 
formation of the National Federation was an important 
step in the growth of the movement since it was in line 
with the general tendency toward organization on a 
national scale. 

* Marketing ^ Farm Credits, National Conference on Marketing & Farna 
Credits, 1916, p. 430. 



COLLECTIVE BARGAINING 165 

Section ^. Discussion of Specific Organizations 

The New England Milk Producers' Association, as now 
organized, was incorporated June, 1917, under the Massa- 
chusetts law providing for non-profit, non-stock associ- 
ations.^ The association is organized into local associ- 
ations, county associations, market associations, and a 
central association. The local associations are "composed 
of the dairy farmers in any vicinity who have subscribed 
to the by-laws and regulations of the New England Milk 
Producers' Association." ^ The county associations are 
in turn composed of delegates from three or more locals. 
The market associations are "composed of delegates from 
local associations whose members sell in any market other 
than Boston or New York." ^ The central association 
is made up of the presidents of the various county associ- 
ations and is the governing body of the organization. It 
organizes for business by electing at its annual meeting 
a president, vice-president, treasurer, and clerk, and also 
a board of directors — two from each state. The central 
association may delegate to the board of directors any 
of its powers, and the directors may in turn delegate their 
powers to an executive committee composed of five of 
their own number. The membership fee is one dollar. 
Annual dues are "one-half of one per cent of the amount 
received . . . from the sale of dairy products, payable 
monthly at the principal office of the association." ^ The 
revenue from such annual dues is to go 85 per cent to the 
central association, 10 per cent to the local association, 

1 Letter from R. Pattee, Mgr. N. E. M. P. A., May, 1919. 
^ New England Dairyman, June, 1919, p. S- 

3 Ibid. 

4 Ibid. 



i66 THE MARKETING OF WHOLE MILK 

and 5 per cent to the county association. On January i, 
1920, the association had a membership of 20,7 14. ^ 

In addition to maintaining an office force at Boston, 
the association has three branch offices, one at Worcester, 
Massachusetts, one at Lawrence, Massachusetts, and 
one at Providence, Rhode Island. ^ 

Since April, 1917, the association has published a 
monthly paper called The New England Dairyman. 

Arrangements have been made by the association to 
take over the Turner Center System — formerly the 
Turner Center Dairying Association — with headquarters 
at Auburn, Maine, for those of its members who supply 
milk in that territory. This system in 191 9 purchased 
of farmers at its numerous creameries 14,890,187.87 
worth of cream and milk.^ Though the New England 
Milk Producers' Association as such is not taking over 
the system, it has done the work which will put it into 
the hands of the producers who sell their milk through the 
system. Since the plan calls for an investment of over 
thirty-two dollars per cow, a novel method was adopted 
for making the transfer from the present holders to the 
new. 

"The plan . . . calls for the establishment of a trust 
fund to acquire the stock of the Turner Center Association. 
This trust fund will be administered by a board of trustees 
selected by the option holders (a committee of the New 
England Milk Producers' Association who had an option 
on the stock of the company and made the transfer ar- 
rangements). 

"These trustees will serve for five years, unless they 

^ Hoard's Dairyman, Mar. 12, 1920, p. 484. 
2 New England Dairyman, Dec, 1919, p. 3. 
' SJth Annual Report Turner Center System, 1919, p. 4. 



COLLECTIVE BARGAINING 167 

sooner accomplish their job of acquiring, reorganizing, 
and extending the Turner Center facilities or are dis- 
charged. They, as trustees, are entirely a separate and 
distinct organization from the New England Milk Pro- 
ducers' Association. . . . They will simply use the trust 
funds to purchase stock in the Turner Center Association, 
a Maine corporation. To raise the amount required, each 
Turner Center patron will be asked to pay in the form 
of cash or negotiable note ^10 per cow. Subscriptions 
to the trust fund may be received from others. Each 
patron will also pledge 5 per cent of his monthly milk 
check to the trust funds. For each $10 contributed to 
the fund, a share will be issued bearing 6 per cent interest. 
The amount so raised will be used to purchase stock 
in the Turner Center Association. The trustees will thus 
gradually acquire the majority stock interest and be able 
to reorganize that concern on a cooperative basis. The 
5 per cent contributed from milk checks will, in five years, 
enable the trustees to acquire all the Turner Center stock 
and pay back the first contribution of |io per cow. This 
being done, it appears that each producer will have con- 
tributed to the trust fund a percentage of his business 
and will own in that fund exactly according to his patron- 
age. The fund being invested in Turner Center stock, the 
producers will through trustees own that stock upon 
the basis of business done through the concern. The 
trustees will then reorganize the Turner Center corpo- 
ration and issue stock therei*n to the shareholders in the 
trust fund, each according to his contribution. 

"Under this plan products may be bought of non-mem- 
bers, but such will not receive any benefit from the profit 
sharing feature or any ownership or interest in the busi- 



i68 THE MARKETING OF WHOLE MILK 

ness. The corporation . . . to be delivered to the inves- 
tors by the trustees will provide in its by-laws that each 
year from the receipts of each member patron a deduction 
of not more than 5 per cent shall be made to pay off those 
who invested years before. 

"Thus a man whose contribution the first year 
amounted to $100 would get 10 shares of that year's issue. 
Five years later there would be deducted enough to take 
up those shares and new ones would be issued to those 
from whom the deduction was then made. In this way 
one-fifth of the whole amount of stock outstanding will 
be retired each year and new stock issued to the pro- 
ducers who furnish the money to retire the old.^ 

One of the most successful organizations for collective 
bargaining is the Dairymen's Cooperative Sales Company, 
organized in the spring of 191 8 to sell the milk of the pro- 
ducers in the Pittsburg district. It should be said, how- 
ever, that its success is due not so much to the form of 
the organization nor to its method of operation as to the 
attitude with which the problems of selling milk have 
been approached. This attitude is to be explained largely 
by the fact that the association had had on its board of 
directors men who saw clearly the real problems to be 
met and who were willing to face them frankly. There 
is also the further fact that the association early had the 
advangage of having at many of its meetings with the 
dealers a man in whom all three interested parties, — pro- 
ducers, dealers, and consumers — had confidence. 

The following quotation from a Pittsburg farm paper, 
referring to a milk price conference, gives a good idea of 
how the problem has been approached and of how the 
plan works: 

^ The New England Dairyman, Sept., 1919, p. 2. 



COLLECTIVE BARGAINING 169 

"The method of adjusting prices is very simple. A 
joint committee is selected, consisting of dealers and the 
directors of the Dairymen's Cooperative Sales Company. 
In the meeting both sides lay all their cards on the table 
and jointly strive to find a basis which is equitable to con- 
sumers, producers, and distributors. In this instance 
the producers thought costs and other conditions justified 
a price of ^3.25 per hundred pounds, but distributors 
showed that the existing surplus is much larger than pro- 
ducers had supposed. Their figures were properly at- 
tested by disinterested parties and were accepted by pro- 
ducers as correctly representing the situation. After some 
discussion, all agreed that conditions warranted a reduc- 
tion of one cent a quart to consumers and a price of $3.00 
per hundred pounds to producers for 2-5 P^r cent milk 
at country plants, or 23 cents per gallon for local milk at 
Pittsburg Dr. Clyde L. King, who has the con- 
fidence of all parties, helped to adjust matters and de- 
clared that the conclusions were equitable. 

"The success of the plan followed here and in Phila- 
delphia is the result of adhering to sound business prin- 
ciples. All parties recognize the fact that prices must be 
governed by supply and consumption; that consumers, 
producers, and distributors are all dependent on each 
other and have their respective rights; and that the essen- 
tial thing is equity to all. As a consequence we now have 
confidence and good will in the milk business where we 
used to have suspicion and disagreements of various 
kinds." 1 

The organization is incorporated under Ohio laws, with 
capital stock of $25,000 divided into ten thousand shares 
of a par value of $2.50 each. Each member is required 

^ National Stockman t^ Farmer, Mar. 8, 1919, p. 3. 



I70 THE MARKETING OF WHOLE MILK 

to subscribe for a minimum of one share and an additional 
one- tenth share for each cow above ten. The members 
hold their membership directly in the central organization, 
but are grouped into locals about the various marketing 
centers. 

The plan of organization of the company is unique in 
two respects. With producers scattered over a wide 
territory, there is always difficulty in keeping members 
in sufficiently close touch with the board of directors and 
officers. In order to bridge the usual gap and to make 
the association truly democratic, provision is made for an 
advisory council, composed of representatives of the 
local branches at the ratio of one councilman to every 
fifty members or major fraction thereof in a given local. 
Theoretically this council is "an organization of the stock- 
holders for the purpose of looking after their interests and 
directing the general policies of the company." ^ The 
board of directors of the company is the executive com- 
mittee of the advisory council. The board of directors 
have the privilege of the floor but may not vote. The 
officers of the company are ex officio officers of the ad- 
visory council. Special meetings of the advisory council 
are to be called by the president or secretary at the re- 
quest of the majority of the board of directors or at 
the request of twenty-five members of the advisory 
council. 

At the quarterly meeting held on the first Friday in 
June, the council places in nomination the names of not 
less than five stockholders to be voted upon at the annual 
election of directors for the ensuing year. It also appoints 
three tellers, who " shall meet at the principal office of the 
company on the fourth Saturday of June and shall count 

^ Dairymen's Price Reporter, Jan. 20, 1920, p. 2. 



COLLECTIVE BARGAINING 171 

the votes for directors as returned to the secretary of the 
board of directors by the respective local branches." ^ 

The advisory council conducts all investigations of 
charges of neglect of duty on the part of officers or direc- 
tors; fixes the amount of commission to be charged on the 
members' milk; fills vacancies on the board of directors 
occurring between elections; and proposes amendments 
to the constitution for adoption by the stockholders. 

The second unique feature in the organization of the 
Dairymen's Cooperative Sales Company is the method 
of conducting the annual election, which is held on the 
second Saturday of June of each year at the regular meet- 
ing places of the respective locals, where the members 
vote for directors of the company. The vote is there re- 
corded "in duplicate by tellers appointed by the local 
branches, one copy to be retained by the local, the other, 
properly certified by the president and secretary of the 
local, to be returned to the secretary of the board of direc- 
tors, who shall meet with the tellers appointed by the 
advisory council on the fourth Saturday of June at the 
principal office of the company, when the entire vote shall 
be counted and the (5) persons receiving the highest 
number of votes shall be declared elected directors for the 
ensuing year." ^ 

The Dairymen's League, Incorporated, is a New Jersey 
organization 3 incorporated in 1907 with $100,000 of capital 
stock divided into shares of the par value of $2.50. The 
capital stock was increased in 191 9 to $500,000 to ac- 
commodate additional members.^ Shares are held on the 

^ Dairymen's Price Reporter, Jan. 20, 1920, p, 2. 
2 Ibid., p. 13. 

' Sometimes incorrectly called the New York Dairymen's League because of 
the fact that it operates largely in New York State. 
* Dairymen's League News, Jan., 1919, p. 7. 



172 THE MARKETING OF WHOLE MILK 

basis of one-tenth share per cow. Any person or firm 
producing milk may become a stockholder. Shares are 
not transferable until the secretary has been given thirty 
days' notice of intention to sell. The corporation reserves 
the right to buy at par value. 

The plan of organization is to group the members into 
local and county associations. Members of the league 
at any shipping point may organize " to assist the directors 
and facilitate the business of the company and transact 
such other business of the company as its members may 
decide, if it does not conflict with the purpose of the 
organization." ^ County associations may be formed by 
the members in any county. At a meeting of a county 
association the voting is done by the presidents, secre- 
taries, and treasurers of the various local branches in the 
county.2 

At an election of the Dairymen's League the voting is 
by shares, in person or by proxy. At the annual meeting 
held in December, 191 8, over twenty-four hundred stock- 
holders were in attendance.^ Delegates from the various 
local branches are expected to secure proxies from as 
many as possible of their local members.^ 

In addition to the proceeds from the sale of capital 
stock, the league gets a considerable amount of revenue 
from commissions on sales of milk levied at the rate of 
one cent per hundredweight. For the twelve months 
ending November 30, 191 9, the revenue from this source 
was ^270,695.26. Of the fund resulting from this one 
cent per hundredweight commission, the league is now 

^ Proposed By-law for Local Branches. 
^ Proposed By-laws for County Associations. 
' Dairymen's League News, Mar. 25, 1919, p. I. 
* Ibid., Dec, 1918, p. 5. 



COLLECTIVE BARGAINING 173 

returning to each local thirty cents for each member pay- 
ing the commission.^ 

The league is really governed by twenty-four directors, 
selected for one year. They are selected by districts, into 
which league territory is divided. ^ At its first meeting a 
newly elected board of directors chooses from among its 
own members the president and vice-president. It then 
elects four other members of the board to act with the 
president as an executive committee.^ 

Prices are arranged by the executive committee, some- 
times after consulting with the board of directors.^ A 
cooperative plant department has been organized and 
has sold milk for cooperative plants which were in a posi- 
tion to ship milk directly to dealers in New York City. 
During eleven and one-half months, ending November 30, 
1919, this department sold $1,008,901.60 worth of milk.^ 
Milk is sold by the league for members, who contract 
directly with the association. The contract is of the self- 
renewing type, running for six months' periods, at the 
end of any one of which a member may withdraw. If a 
member fails to comply with his contract, he must pay 
liquidated damages amounting to five dollars per cow. 

Since February, 191 7, the league has published the 
Dairymen s League News, first as a monthly and at present 
as a bimonthly publication. 

For a number of years, or since 191 6, plans have been 
discussed for the reorganization of the Dairymen's 
League.® In January of 191 9 the dairymen and dealers 

^ Dairymen's League News, Jan., 1919, p. 7. 
2 Ibid., Dec. 10, 1919, p. 12. 

* Printed Constitution and By-laws, p. 6, 1916. 

* Dairymen's League News, Feb. 10, 19 19, p. i. 
^ Ibid., Dec. 10, 1919, p. 21. 

^ Ibid., Dec. 10, p. 11. 



174 THE MARKETING OF WHOLE MILK 

failed to agree on a price, and this disagreement resulted 
in a boycott of the dealers during the first twenty-five days 
of January. This difficulty brought to a head the idea of 
reorganization, which then took the form of a plan to 
organize all the dairymen in the New York milk shed into 
one vast cooperative association which should take over 
as rapidly as possible the entire milk business for the 
territory. 1 The plan at present is to take up first the 
manufacturing end in the country, because that is the 
end with which the farmers are the most familiar and also 
because it constitutes two-thirds of all the milk production 
of the Dairymen's League members. City distribution 
may be the next step, if this first step succeeds. ^ 

The Dairymen's League Cooperative Association was 
incorporated under Article 13A of the membership cor- 
poration laws of New York as revised in 191 8. The incor- 
poration took place late in March of 1919.^ This associa- 
tion is strictly a non-stock, non-profit corporation and 
is, at least for the present, not to displace the league, but 
is to be a parallel organization.^ Arrangements have 
recently been made whereby the directors of the new 
organization and of the Dairymen's League shall be one 
and the same.^ The plan is for members of the Dairy- 
men's League Cooperative Association to form local as- 
sociations in the various marketing centers, which are 
to take over or construct local creameries, condenseries, 
or country milk plants. Later there are to be regional 
associations. The organization is being built up around 
the idea that all milk is to be pooled through the central 

^ Dairymen's League News, Feb. 25, 1919, p. I. 

2 Ibid., June 25, 1919, p. i. 

3 Ibid., April 25, 1919, p. 2. 
^ Ibid., Apr. 25, 1919, p. 2. 
^ Ibid., Dec. 10, 1919, p. i. 



COLLECTIVE BARGAINING 175 

association — to which all payments for sales are to be 
made.^ As pointed out in the preceding section, this as- 
sociation has already acquired a number of plants, which 
are now being operated on the cooperative plan. All re- 
turns are to be prorated to the members, so that all mem- 
bers stand on an equal basis. 

Voting in this association is to be entirely on a member- 
ship basis.2 

The cooperative association is to be financed by a rota- 
ting fund method somewhat similar to the plan already 
discussed in connection with the New England Dairymen's 
Association. This plan can best be given by quoting from 
an article written by the president of the association, as 
follows : 

"The financing of this proposition is to be accomplished 
by first securing loans from the producers, which loans are 
to be represented by certificates of indebtedness. The 
certificates are to be paid in five equal, yearly installments, 
with interest by deductions taken from the proceeds of 
milk after service charges have been deducted. This will 
result in the producers owning all of the facilities for 
handling the milk at the end of five years. It is then pro- 
posed at the end of each year to issue new certificates for 
the amounts deducted from each producer's milk, and 
this process to continue during the life of the association, 
so that the producer's investment in the plants will be rep- 
resented by the service he has received from the plants." ^ 

The Chicago Milk Producers' Association was incor- 
porated February 26, 1909, as a non-stock company.^ 

^ See By-Laws Proposed for Locals, Dairymen's League News, June lo, 1919, 
pp. 4 and 5. 

2 Hoard's Dairyman, Jan. 30, 1920, p. 76. 

* Fuller, Bradley, in Hoard's Dairyman, Jan. 30, 1920, p. 76. 

* Milk News, Oct., 1917, p. 2. 



176 THE MARKETING OF WHOLE MILK 

It was not very active until the spring of 1916, when it 
boycotted the Chicago dealers and obtained a higher price 
for its milk. As a result of this and other successes, it 
grew rather rapidly and soon included the major portion 
of the producers in the Chicago district. 

It is organized into locals about the various shipping 
points, and the members in each county are also organized 
into county associations. Members hold membership 
directly in the locals, and the total membership of such 
locals constitutes the central association. "Any person, 
firm, or corporation engaged in the production of milk, 
any farm, or farm owner residing in and operating in the 
territory tributary to the city of Chicago, Illinois, may 
. . . become a member of the association." ^ 

The members in each county form a county association, 
which elects a set of officers of its own. Each county 
association having fifty-one to one hundred members in 
good standing then elects a director of the central associ- 
ation. If a county association has more than one hundred 
members, an additional director may be elected for each 
additional three hundred members, but no county associ- 
ation may have over four directors. An annual meeting 
of members, at which officers are elected, is held at some 
point convenient to the greatest number of members 
of the central association. 

The board of directors has general charge of the business 
of the association. It may also expel any member or re- 
move any officer for cause after proper hearing. In August, 
1 91 6, it acted under this power to remove the president 
by expelling him from the association. ^ 

In the spring of 1916 a movement was started within 

^ By-Laws in Year Book and Directory, 1917. 
2 Hoards Dairyman, Sept. 8, 1916. 



COLLECTIVE BARGAINING 177 

the association to perfect a stock company which should 
sell the members' milk and even acquire country plants, if 
necessary. After considerable controversy, the company 
was organized and enough stock sold to enable it to secure 
a charter, which it did on November i, 191 8. The com- 
pany has a capital stock of $500,000, divided into ten 
thousand shares of the par value of $50. No member may 
own over five shares. It is said that there are not over 
twenty members out of about six thousand shareholders 
who have over one share. ^ 

The company began operation February 15, 1919. Up 
to November 11, 1919, it had sold over |i3,ooo,ooo worth 
of milk.2 The association is managed by an executive 
committee of five who have immediate supervision of 
the management. 3 The stockholders at each annual meet- 
ing elect nine directors for a term of three years, thus mak- 
ing twenty-seven directors. They in turn elect the officers 
from among their number. 

The producers contract for the sale of their milk directly 
with the association under the self-renewing contract 
already quoted. The company then sells as best it can 
to the various dealers in Chicago and vicinity. The milk 
is paid for through the company, which in turn makes 
payments for milk coming from centers in which there are 
manufacturing plants through local banks in such centers. 
A commission of one per cent of sales is charged to cover 
its operating expenses. A slightly higher charge is made 
on can shippers who ship directly to Chicago.^ 

A group of organizations worth noting is that in Cali- 

^ Milk News, June, 1919. 

2 Prairie Farmer, Nov. 12, 1919, special edition. 

' Milk News, Jan., 1920, p. 2. 

* Ihid., June, 1919, p. 6. 



178 THE MARKETING OF WHOLE MILK 

fornia. There are at least eight important association 
and two or three smaller ones, all but one of which are 
organized on a non-stock, non-profit basis. The first of 
these to be organized was the Associated Milk Producers, 
Inc., supplying the city of San Francisco. This was in- 
corporated March i6, 1916, with $50,000 capital stock.^ 
In the next few years organization proceeded rapidly, the 
other associations being organized as above stated on the 
non-stock, non-profit basis. During the year ending 
December i, 191 8, this group of organizations handled 
about $20,000,000 worth of dairy products. ^ As noted in 
the preceding section, most of these plants have one or 
more local creameries, and several are providing themselves 
with elaborate utility plants in which any of the dairy 
products can be manufactured. In August, 191 9, twenty- 
four such plants were in operation.^ 

To give a better idea of the plan of organization of these 
associations, we may look a little more carefully into the 
organization and operation of the Northern California 
Milk Producers' Association as being more or less typical. 
Any dairyman may become a member upon being ad- 
mitted by a vote of the board of directors and upon pay- 
ment of a fee of $5.00 for each cow owned by him, with 
a minimum fee of $10.00.^ Members are given a member- 
ship certificate, which cannot be transferred or assigned, 
unless the board of directors sanction such a transfer or 
assignment. 

The association is governed by a board of eleven direc- 
tors, elected at the annual meeting of members. The 

^ First Annual Report State Market Director of California, 1916, p. 19. 
2 Third Annual Report State Market Director of California, 1918, p. 47. 
' Fourth Annual Report of State Market Director, 1920, p. 44. 
* By-Laws, 1919, p. 16. 



COLLECTIVE BARGAINING 179 

members of this board at their first meeting elect the offi- 
cers of the association. At least the president must be 
one of their own number. The directors may also provide 
for an executive committee from among their own mem- 
bers, with the addition of the state director of markets 
or some man named by him.'^ Provision is also made that 
the directors may provide for an auditing committee to 
be appointed from among themselves. 

The voting is on the one-man-one-vote basis, but prop- 
erty rights are unequal. The articles of incorporation 
state that "the interest of each member in the property 
of the Association shall be in the same proportion as the 
amount of membership fee actually paid by him bears to 
the total amount of all membership fees paid by all mem- 
bers of the Association." ^ 

The members of the association bind themselves by 
contract to sell all their milk through the association and 
agree to the following provision for liquidated damages: 

"Each member of the Association has in these by-laws 
and otherwise agreed to market all of the milk, cream, 
butter, cheese and other dairy products produced or owned 
by him, through the Association. Each member admits 
that it would be extremely difficult and impracticable to 
fix or ascertain the amount of damages which the Associ- 
ation or its members would suffer if one or more of its mem- 
bers should neglect, refuse, or fail to keep and perform 
the terms and conditions and agreements herein and in 
his marketing contract contained, for which reason it is 
expressly understood and agreed by and between each 
of the members of the Association, including any persons 
to hereafter become members, that if any member shall 
neglect, refuse or fail to market the whole of his milk, 

^ By-Laws, 1919, p. 12. ^ Ibid., p. 4. 



i8o THE MARKETING OF WHOLE MILK 

cream, butter, cheese and other dairy products which he 
has to market or dispose of, through the facihties provided 
by the Association, that such member shall pay to the 
Association, as liquidated damages, and upon demand 
of the Association, the sum of fifteen (15) per cent of the 
value of the product sold by him otherwise than through 
the Association." ^ 

Provision is made, however, whereby any member may 
withdraw his milk or other dairy products from the mar- 
keting arrangements, such withdrawal to take effect May i 
of any year, providing he gives written notice of his intent 
to withdraw at least thirty days before the annual meeting 
of the year in which such withdrawal is to take effect.^ 
In case a member ceases to be a milk producer, provision 
is made for refunding to him the dues paid or such propor- 
tion of the dues as his proportionate share of the assets 
of the association amount to at the end of two years. 

All expenses of maintaining the association are dis- 
tributed over all the business done by the association for 
its members and charged against each member in propor- 
tion to the amount of business which the association has 
done for him.^ 

This whole group of California milk producers' associ- 
ations has been federated into the Associated Dairymen 
of California, which was incorporated August 4, 19 17, as 
a non-stock, non-profit organization, with five associations 
as its charter members.^ At the close of 1 919 this organi- 
zation included approximately eight thousand dairymen, 
members of the following associations:^ 

^ By-Laws, 1919, pp. 18-19. 

2 Ibid., p. 19. 

< Ibid., p. 18. 

^ Second Annual Report of State Market Director of California, 1917, p. 24. 

^ Fourth Annual Report of State Market Director of California, 1920, p. 45. 



COLLECTIVE BARGAINING i8i 

Northern California Milk Producers' Association, Sacramento; 
Milk Producers' Association of Central California, Oakland; 
Associated Milk Producers, Inc., San Francisco; San Joaquin 
Valley Milk Producers' Association, Fresno; California Milk 
Producers' Association, Los Angeles; Imperial Valley Milk 
Producers' Association, El Centro; Salinas Valley Dairy Asso- 
ciation, Soledad; Milk Producers' Association of San Diego, 
San Diego. 

Membership in the central association consists of two 
representatives from each of the member organizations 
"duly accredited to represent and bind the association." ^ 
The members of the central association are "joint trustees 
for their respective milk producers' association," ^ and 
they hold any property rights which they acquire solely 
as trustees for the association which they represent. Each 
member pays a $ioo membership fee upon entering. The 
vote of the members is equal at any meeting or on any 
subject. The members meet annually and elect a board 
of ten directors, who in turn elect the officers. 

Each of the units retains its individual and corporate 
identity and continues to handle the production and manu- 
facture of its own products and to care for such milk and 
sweet cream produced by its members as are marketed in 
those forms. "The products, such as butter, cheese, 
casein, sugar of milk, evaporated milk, condensed skim 
milk, powdered milk, and other dairy products will be 
marketed . . . through the medium of the Associated 
Dairymen of California." ^ The association has already 
appointed a market director, with the idea of getting the 
products more directly into the hands of consumers and 

^ Multigraphed By-Laws, p. lo, 

2 Ibid., p. 13. 

' Third Annual Report oj State Market Director of California, 1918, p. 49. 



i82 THE MARKETING OF WHOLE MILK 

of eliminating speculation. The association also proposes 
to investigate foreign markets and will establish branch 
offices in the eastern states of this country. 

Provision is made that the district associations above 
named "may withdraw from the marketing arrange- 
ments, . . . such withdrawal to take effect on the first 
Monday of November of each year, provided such coopera- 
tive milk producers' association gives written notice of its 
intention in that regard . . . on or before July i of any 
year." ^ In case any district association fails to live up 
to its contract to sell all its manufactured product through 
the association, provision is made for liquidated damages 
to be paid by such defaulting association very much as 
was provided in the case of the Northern California Milk 
Producers' Association above. 

Following are the principal milk producers* associa- 
tions in operation at the present time, together with 
principal market centers: 

Principal Milk Producers' Associations in the United States 

Associated Dairymen of California The State. 

Northern Cahfornia Milk Producers' Association. . Sacramento, Cal. 

MilkProducers' Association of Central Cal Oakland, Cal. 

Associated Milk Producers', Inc., San Francisco, Cal. 

San Joaquin Valley Milk Producers' Association. . .Fresno, Cal. 

California Milk Producers' Association Los Angeles, Cal. 

Imperial Valley Milk Producers' Association El Centro, Cal. 

Salines Valley Dairy Association Soledad, Cal. 

Milk Producers' Association of San Diego San Diego, Cal. 

Colorado Milk Producers' Association Denver, Colo. 

Milk Producers' Cooperative Marketing Co Chicago, 111. 

New England Milk Producers' Association Boston, Mass. 

Maryland State Dairymen's Association Baltimore, Md. 

Michigan Milk Producers' Association Detroit, Mich. 

* Multigraphed By-Laws, p. 12. 



COLLECTIVE BARGAINING 



183 



Twin Cities Milk Producers' Association Minneapolis & St. Paul, Minn. 

Midwest Milk Producers' Cooperative Associa- 
tion Omaha, Neb. 

The Dairymen's League New York City 

The Dairymen's League Cooperative Associa- 
tion New York City 

The Queen City Milk Producers' Association .... Cincinnati, Ohio 
The Ohio Farmers' Cooperative Milk Company. . Cleveland, Ohio 

The Oregon Dairymen's League Portland, Oregon 

The Inland Empire Milk Producers' Association. Spokane, Washington 
The Dairymen's Cooperative Sales Company. . .Pittsburgh, Pa. 
The Inter-State Milk Producers' Association .... Philadelphia, Pa. 
The United Dairy Association of Washington. . . . Seattle, Washington 
The Milwaukee Milk Producers' Association Milwaukee, Wisconsin 



Section 5. Cooperative Distribution of Milk 

Although the movement toward cooperative milk dis- 
tribution is in its infancy, it has been spreading rapidly 
of late. The writer has knowledge of the existence of 
twenty-six farmers' companies distributing milk at this 
time (May, 1920). The newness of this development 
is shown by the following table giving dates of organi- 
zation of twenty-five of these companies: 



Table XXXV 

Year of Organization of Twenty-Jive Farmers' Milk Distributing Companies 



Year 


Number organized 


i8qq 


I 


iqo6 


I 


IQI-S. 


I 


IQ16 


7. 


TQI7. 


S 
c 


1918 


iqiq 


7 


IQ20. 


2 







i84 THE MARKETING OF WHOLE MILK 




COLLECTIVE BARGAINING 185 

These farmers' distributing companies are for the most 
part in smaller cities and have thus far not been handling 
large quantities of milk. Most of them distribute from 
200 to 1 ,000 gallons of milk daily, while one runs as high 
as 4,000 gallons. In addition, of course, most of them 
handle some surplus milk. These companies are giving 
farmers an opportunity to get first hand information 
regarding the complex problems of the milk distributing 
business, and of the difficulties to be overcome if profits 
are to be realized. 

The oldest of these companies is the Erie County Milk 
Association of Erie, Pennsylvania, which was organized 
in 1899. At that time there were eighty-five or ninety 
milkmen driving into the city to distribute their own milk. 
About 80 per cent of these joined in the formation of 
a company.^ Each member subscribed for ^3.00 worth 
of stock for each quart of milk supplied daily — in other 
words, a $50 share for every 16 2/3 quarts. The degree of 
success of the venture is indicated by the fact that al- 
though no stock has been issued in addition to the original 
$30,000, the market value in 1917 was 1150,000.2 

A considerable number of these companies were formed 
by groups of men who had been peddling their own milk, 
as was the case at Erie. Such cooperation in each case 
resulted in economies, not only in the handling of the 
milk at the central plant, but in its distribution. The 
economy resulting from cooperative distribution is in- 
dicated by the comparison in Table XXXVI on p. 186. 

In some instances, as at Columbus, Ohio, where two 
companies are now in operation, farmers got together and 
formed these companies because they were dissatisfied 

^ Milk Trade Journal, Nov., 19 17, p. 42. 

^ Marketing Dairy Products, Cir. No. i, U. S. Bu. of Markets, Feb., 1920. 



i86 THE MARKETING OF WHOLE MILK 

with conditions and prices, and because they felt that 
dealers were exacting too wide a margin. 

Table XXXVI 

Number of Drivers Required to Deliver Milk Before and After Formation of the 
Cooperative Companies 



Location 


Before organization 


After organization 


Erie, Pa.i . 


65 
15 
10 


23 
5 
4 


Du Bois, Pa.2 


Greenville, Pa.^ 





Of twenty companies nine provide for a patronage 
dividend of some sort and eleven do not. Many of the 
companies depend to some extent on others than members 
to supply them with a part of their milk. 

Some of these attempts on the part of farmers to dis- 
tribute their own milk cooperatively have proved mark- 
edly successful. Others have resulted in partial or total 
failure, due to inadequate financing or lack of business 
skill and foresight. Several have had difficulties arising 
out of bad management and one has gone into bankruptcy 
within the past year because of dishonesty and misman- 
agement. One company, after operating profitably for 
about ten years, failed because of inadequate accounting 
and lack of intelligent supervision by the board of direc- 
tors.^ 

It is doubtless too early to characterize the movement 
either as a success or a failure. Cooperative grain market- 
ing is now generally considered successful, yet its begin- 

1 Marketing Dairy Products, Cir. No. i, U. S. Bu. of Markets, Feb., 1920. 

2 Weekly News Letter, June 4, 1919, p. 16. 

3 Ohio Farmer, March 8, 1919, p. 382. 

* Marketing Dairy Products, Cir. i, U. S. Bu. of Markets, Feb., 1920. 



COLLECTIVE BARGAINING 187 

ning was marked by many failures, and doubtless many 
of the existing grain companies will fail. In the fruit 
business, too, there have been many failures, yet coopera- 
tion is recognized as having done much for fruit growers. 
Likewise, there is doubtless much to be gained from co- 
operation on the part of dairymen, provided they do not, 
at the start at least, undertake ventures that are too big 
and too complex, and provided further, that they secure 
and adequately supervise the necessary business ability. 



CHAPTER VI 

MILK PRICES 

Section i. Price Relationships 

Price is a matter of relationships of a bewilderingly 
complex nature. As an eastern editorial writer puts it, 
" the intricacy of price making in the New England mar- 
kets is beyond the understanding of man." ^ Price is the 
resultant of the action and reaction of supply and demand 
and of the complex forces lying back of each. It is gen- 
erally understood that a shortage in supply will bring 
about high prices and that a surplus will in the same way 
result in low prices. On the other hand, it is not so gen- 
erally realized that a change in the demand will also in- 
fluence price, which is but the focal point of the forces 
of supply and demand, and that price actually influences 
demand. Thus a decrease in the supply of milk usually 
means an increase in the price. But dealers are keenly 
aware of the fact that such an increase in price will most 
surely mean a decrease in consumption. A Toledo firm 
reports that in the summer of 191 8 an increase in the price 
of from 13 to 15 cents, amounting to a 15 per cent in- 
crease, caused a decrease of consumption of 8 per cent. 
Other instances have been reported where such decreases 
have amounted to 10 or 20 per cent. The decrease in 
consumption of milk owing to an increase in price varies 
widely with such factors as wage increases, rise of other 

^ New England Dairyman, Apr., 1917, p. 6. 
188 



MILK PRICES 



189 



prices, attitude of competitors, attitude of public officials, 
attitude of the newspapers, and the state of public senti- 
ment in general. For example, during the period of the 
war there were many instances in which increases in price 
of milk resulted in very little decrease in demand because 
some public body or the public in general had satisfied 
itself that the increase in price was justified, and that milk 









THE EFFECT OF PRICE PER QUART AND PER PIHT ON THE PROPORTION OF EACH SOLD 




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Fig. 13. — Effect of Price per Quart and per Pint on the Proportions of 

Each Taken.^ 

was still a cheap food, since other prices had also been in- 
creasing. In other instances, however, it took a consider- 
able amount of publicity to overcome the tendency to 
curtail consumption as price increased. The Chicago 
Health Department reported that in Chicago when milk 
was selling at 8 cents per quart, the daily consumption 
amounted to about one million quarts. When the price 
rose to 10 cents only about 8oo,oco quarts were consumed. 

^ From Wis. Agr. Exp. Sta. Bui. 285, p. 36. 



I90 THE MARKETING OF WHOLE MILK 

An increase to 13 cents per quart reduced the consumption 
to about 584,000 quarts. This means, if the Department's 
estimates were correct, that Chicago consumers were 
actually paying out less for milk with the price at 13 cents 
than they had spent when the price was 8 cents per quart. ^ 
A similar experience was reported in Cleveland, where a 
leading dealer claimed to have lost more by raising the 
price from 9 to 10 cents per quart than he would have 
lost had it remained at 9 cents. In this case the demand 
did not come back to normal until the following spring. 
On the other hand, when prices are again lowered, it is 
often hard to bring consumption back to normal, because 
of the fact that milk consumption is so largely a matter 
of habit. 2 In Chicago, on the above mentioned occasion, 
consumption remained about 16 per cent below normal 
for some time after the price had been reduced to 12 cents.^ 
Just as an increase in the retail price will cause a falling 
off in the consumption, so an increase in the price paid to 
producers usually means an increased supply, unless 
counteracting forces are also at work, such, for example, 
as increases in costs or better opportunities along other 
lines. When prices are unusually good, producers are 
encouraged to increase supply. This they can do in sev- 

' Duncan, C. S., Jour. Pol. Econ., Apr., 1918, p. 333. 

2 This at first thought appears to be a case where a rule did not work both 
ways. That is, whereas an increase in the price of milk caused a decrease in the 
demand, a decrease in the price did not in the same degree cause an increase in 
consumption. What had probably happened was that milk prices had become 
customary. Then when these customary prices were disturbed in a way un- 
favorable to consumers, the latter became resentful, especially where their sense 
of injury was fanned by public statements and press dispatches. On the other 
hand, once a lower standard of consumption had become habitual, a fall in 
price did not of itself at once jar people out of the new habits, and hence the 
demand did not respond quickly to price cuts. 

' Davenport, E., Hoard's Dairyman, Mar. i, 1918, p. 234. 



MILK PRICES 191 

eral ways. Each farmer, for example, feeds his cows a 
little more grain. He may house them a little more com- 
fortably — keep them in on cold days, etc. He feeds less 
milk to calves and pigs. He may even curtail consump- 
tion of milk in his home; perhaps he buys oleomargarine, 
for example, so as not to have to skim any of his milk in 
order to provide butter for the family. Finally, he may 
keep his cows longer, /. ^., each farmer, instead of turning 
off some of the older cows, as he usually does, and replac- 
ing them with heifers, may milk both the old cows and 
the heifers, thus increasing the size of the herd. All of 
these influences would become operative with an attrac- 
tive increase in price, some of them quickly, others more 
slowly. With a decline in price the reverse operation 
would take place. In addition to the above changes, of 
course, an increase in price in a given market will attract 
milk from other markets, whereas a general increase in 
the price of milk will attract milk from other uses. This 
last point is an important one, particularly in such sec- 
tions as the milk sheds of New York, Milwaukee, or 
Toledo, where so large a proportion of the milk is manu- 
factured into the various milk products. 

There has been much said during the past few years 
regarding the relation between cost and price. The idea 
has often been advanced that price should equal cost plus 
a "reasonable profit." Much of the discussion has been 
by people who assumed that there is a definite figure 
representing the cost of producing milk in general, as though 
all milk of market grade cost the same amount. This, 
of course, is untrue, for costs vary about as widely as do 
men and cows and the conditions under which they live. 

Again it has been suggested that price should equal 
average cost plus a "reasonable profit." But to average 



192 THE MARKETING OF WHOLE MILK 

the various costs would at once leave half of the producers 
"out in the cold," since half of them would be producing 
at a cost higher than the average and would be compelled 
to quit the business if prices were established at that 
figure. 

It is often said that over a considerable period of time 
the price of a commodity will tend to equal its marginal 
cost of production, i. e.^ the cost of the most expensive 
portion of the supply. This is undoubtedly true. But to 
say that price tends to equal marginal cost is not neces- 
sarily to say that marginal cost tends to determine price. 
Price itself may have much to do with the determination 
of this marginal cost, since any producers having higher 
costs will be eliminated because consumers are unwilling 
to pay a price sufficient to keep them in the game. In 
other words, we are not sure as to which blade of the shears 
is doing the cutting. ^ 

Suppose, for example, that producers A, B, C, D, and E 
are producing milk at costs of I3.00, $2.90, ^2.80, ^2.70, 
and $2.60 per hundredweight respectively. With the 
price at ^3.00 A is just able to continue production, and 
the others make some profit. Farmers X, Y, and Z, let 
us suppose, have tried to produce and have found that 
their costs were $3.30, I3.20, and I3.10 respectively. 
Being unable to produce cheaply enough, they have 
dropped out. A's cost is, therefore, the marginal cost but 
can hardly be said to have determined price. A decrease 
in demand might have made B's cost the marginal one. 
In the long run price must, of course, cover cost of pro- 
duction of the most expensive portion of the total product 
which society is willing to continue to purchase. 

It is incorrect, however, to think that the most expen- 

* See Alfred Marshall, Principles of Economics, Sixth Ed., p. 348. 



MILK PRICES 193 

sive portion of the product is necessarily the marginal 
product in the sense that it will be the first to be with- 
drawn in case price falls. It may be, and indeed often is 
a more cheaply produced portion of the supply which is 
withdrawn when price falls, because what we may call 
the real cost of production often includes an "opportunity 
cost," that is, the sacrifice of an opportunity to do nearly 
as well at some other line of production. Then when the 
milk price falls slightly, this alternative line becomes the 
more attractive and causes the producer to change, even 
though his actual money and labor costs are not the high- 
est. We must, therefore, think of the marginal producer 
not as the man who produces at the highest cost, but as 
the man who is just barely induced to continue to supply the 
product. This definition obviously will include both the 
man who is producing at a high cost and the man who has 
a high opportunity cost. An example will make this 
clear: 

Suppose that with the price of milk at $3.00 per hun- 
dredweight farmer A just succeeds in making a living and 
paying all necessary expenses. He is a marginal producer 
in either of the above senses. Farmer E, however, may 
be producing milk at an expense of but |i.6o per hundred- 
weight, which leaves him a profit of $1.40 per hundred- 
weight, and still be as truly a marginal milk producer as 
A in the sense that any reduction in the milk price may 
induce him to cease producing because he can make more 
at some other line of farming. The withdrawal of E's sup- 
ply of milk would as surely create a shortage as would the 
withdrawal of A's supply; yet one produces at a cost of 
|i.6o and the other at a cost of ^3.00, and both would 
withdraw from production if the price fell to $2,90. Indeed 
E might withdraw first, because he is a more capable 



194 THE MARKETING OF WHOLE MILK 

farmer and therefore not only more quickly sees oppor- 
tunity for gain in some other line, but can more readily 
rearrange his operations so as to take advantage of this 
alternative opportunity. 

Men who urge for farmers prices that will insure "cost 
of production plus a reasonable profit" overlook the 
fact that even if milk were 15 cents a quart and wheat 
$7.00 a bushel some men would still be producing at a 
loss because new and less efficient men are always at- 
tempting to enter any business which promises profit, and 
because older producers may temporarily become less 
efficient. Thus there would quite certainly continue to 
be "marginal producers" in both the above senses, even 
at those high prices. 

Section 2. Determination of Wholesale Milk Prices 

By wholesale prices we here mean the prices paid to pro- 
ducers at country or city points receiving milk directly 
from producers. These wholesale prices and their deter- 
mination are of particular interest to us because it is at 
that stage that price levels of milk are really determined. 
It is there that all the complex forces of supply and de- 
mand focus. Increased or decreased production is there 
quickly observed, and changes in demand for milk for any 
of its many uses are also quickly reflected. In general, the 
use to which a particular lot of milk is to be put must be 
decided upon within a few hours after it has been delivered 
at a receiving plant. True, condensed and powdered milks 
have many uses, and decision as to the particular use 
need not be made for months or years. But in the case 
of milk as it comes from the farm the perishability is so 
great that within a very short time after it is delivered 
at the plant definite decision must be made as to how 



MILK PRICES 195 

much, if any, is to be used in butter manufacture, how 
much for cheese, how much for fluid consumption, how 
much for condensing, etc. Many plants, of course, make 
butter only; others make cheese only. IV^any, however, 
are so equipped that they can earily change from one line 
of production to another according as one or the other is 
more profitable. In the aggregate the number of plants 
which can thus change from one line to another is suffi- 
ciently large to keep a fairly close balance between the 
various use-demands, and these use-demands focus on 
the various receiving points. 

The individuals who are engaged as producers and 
dealers have very real problems to face in trying to arrive 
at prices. For wheat and corn there are well regulated 
market places or exchanges at which the various forces 
back of supply and demand can register at intervals of 
minutes or even seconds. Changes are here registered 
in cents and eighths of a cent and these changes flashed 
to various parts of the world by telegraph and tele- 
phone. 

Similar mechanisms facilitate the determination of 
market prices of many other basic commodities, such as 
cotton, silk, coffee, sugar, and, to a lesser extent, butter 
and cheese. For milk, however, no such mechanism has 
been developed. Consequently, when adjustments of 
price are made at more or less regular intervals, the fluc- 
tuations are more violent and the proper point of equi- 
librium is more difficult to ascertain. Furthermore, price 
adjustments are usually made for periods of a month or 
more in advance — a fact which further complicates the 
problem. One of our leading market journals some time 
ago proposed the idea of an open call for milk in our large 
cities "where surplus or shortage in supply would quickly 



196 THE MARKETING OF WHOLE MILK 

be reflected." ^ Though such a call market would not 
establish prices which would be suitable for milk contracts 
with producers, the editor of the journal held that it 
would "perform a useful function in keeping the trade, the 
producer, and the consumer advised as to the condition 
of the market" and would also "reflect a proper balance 
between prices ruling on market milk and on manufac- 
tured dairy products." ^ At the present time, however, 
so far as the large dealer and the representative of the 
producers* organizations are concerned, the problem of 
price determination is not one of theory or of "glittering 
generalities," but is a matter of arriving at an actual figure 
expressed in dollars and cents. We are therefore particu- 
larly interested in the various methods used in arriving at 
the prices. 

In many instances the determination of the proper 
price has fallen altogether upon the dealers and more 
especially upon the large dealers. The dealer, after look- 
ing about him and deciding what he could get for the milk 
on the one hand and what price would bring forth the 
necessary supply on the other hand, has announced his 
price to the producers. This has very often taken the 
form of announcing to the patrons of a country or city 
plant that on a certain day the books would be open to 
receive signatures to milk contracts for the ensuing con- 
tract period and that the books would be closed on a cer- 
tain date. This method of posting price has generally 
amounted to a fixing of the price by the dealer, since an 
unorganized body of farmers would be likely to sign up, 
even though the price seemed ridiculously low, particu- 

^ New York Produce Review y American Creamery, Oct. 17, 1917, 

P- 994- 
2 Ibid. 



MILK PRICES 197 

larly if it were feared that the company might not be will- 
ing to take all the milk offered. 

In sections where small and large dealers operate side 
by side, the price has usually been named by the larger 
dealer. The smaller dealers watch the larger ones and 
pay approximately the same prices.^ The larger dealer 
is able to gage more accurately the conditions of supply 
and demand than can the small dealer. He is not as free, 
however, to fix a price which suits him as is commonly 
supposed. Assume, for example, that he buys milk at too 
low a price. Some farmers are quite certain to curtail 
their production or divert their milk to other channels, and 
he will find himself confronted with a shortage of milk. 
Hence he will have to pay more. On the other hand, 
suppose he buys milk at too high a price; he will very soon 
find himself with too large a supply on hand, and unless 
he takes all milk offered at this high figure, competitors 
will be able to buy milk at a lower price, which will enable 
them to cut under his selling price. Small dealers in par- 
ticular are wont to cut prices at every opportunity. Hence, 
if they were able to buy more cheaply, they would quite 
certainly undersell the large dealer. The result is that 
the large dealers learn to come very close to a proper de- 
cision as to what price will bring supply and demand to an 
equilibrium. The fact that the smaller dealers usually 
follow closely the prices offered by the larger dealer 
often gives the appearance of combination, and such 
coincidence or tacit agreement has on numerous occa- 
sions been made the basis for grand jury investiga- 
tions. 

The practice on the part of the dealers of posting a 
price and trying to rush farmers into signing the contract 

^ Duncan, C. S., Jour, of Pol. Econ., Apr., 1918, p. 344. 



198 THE MARKETING OF WHOLE MILK 

has in many instances led to revolt on the part of the 
farmers, who have organized for the purpose of fixing 
prices themselves. This was the prime object of most 
of the earlier associations. 

More recently, however, each side has come to recognize 
that the other side may justly have something to say. 
As a result there has more often been some sort of col- 
lective bargaining, such as has already been described.^ 
In connection with such collective bargaining, however, 
there is usually lacking a tangible basis by which the two 
sides can arrive at the same figure. Cost of production 
and market prices of certain milk products have both 
been advocated as automatic price determinants. Most 
frequently suggested, especially during the past few years, 
has been cost of production. Although this determinant 
had earlier received considerable attention, often in at- 
tempts to show that the producers were getting too low 
a price for their milk, there had been little or no serious 
attempt to bring about the use of such cost as a basis for 
prices until after our entrance into the war. At that time 
price-fixing came into vogue, and the most natural basis 
for fixing prices was cost of production. Producers who 
had been firmly convinced that they were getting too low 
a price eagerly grasped at cost of production as the proper 
basis for price determination. 

It is not, however, a satisfactory basis. In the first 
place, cost of production varies from time to time, from 
farm to farm, and from producer to producer. To average 
these costs, as is often suggested, would not do, since, as 
already pointed out, one-half of the producers would at 
once find themselves selling milk at a loss and would stop 
producing. Then again, cost and demand vary independ- 

^ See Chap. V, Sec. 4. 



MILK PRICES 199 

ently and often inversely. For example, it may, and in- 
deed often does happen, that at certain times cost of pro- 
duction rises because of failing pastures and increases in 
the cost of feed, while at the same time the demand falls 
off. In fact, whereas demand is fairly constant through- 
out the year, cost of production varies largely in a seasonal 
way. (See Figures 7 and 9.) Furthermore, even in specific 
instances, actual cost of production is extremely difficult to 
ascertain because of joint costs. It is not the cost of a 
given product, but the joint costs and profits of a comple- 
mentary set of enterprises that the farmer considers or 
should consider in deciding whether or not to produce 
milk.i 

Cost of production, however, can be useful to dairymen 
in the matter of price determination. In the first place, 
properly determined costs show the individual producers 
whether they can as individuals continue to sell milk at 
prevailing prices. In the second place, an accurate knowl- 
edge of costs is a convenient basis from which to start 
in collective bargaining. It gives a strong leverage for a 
minimum price high enough to include most of the pro- 
ducers and may forestall public criticism or court pro- 
ceedings. In case there is a question of fixing prices, as 
in war time, a knowledge of costs is exceedingly valuable. 
Its value here, however, may be overemphasized. Its 
principal service in this connection would seem to be in 
safeguarding a necessary industry in case of temporary 
depressions or in safeguarding the public when there is a 
temporary shortage with its attending high prices. In 
such cases a study of the range in costs would enable 
whatever public body had the matter in hand to establish 
prices at such points as would cover costs of most of the 

1 Taylor, H. C, Agr. Econ., Chap. XXVIII. 



200 THE MARKETING OF WHOLE MILK 

producers. This is the "bulk line" ^ idea of establishing 
the price at such a point as will cover the cost of produc- 
ing the great bulk of the commodity coming to the market. 
Even here, however, a study of costs alone would not 
necessarily keep sufficient supplies coming to the market, 
as the above analysis of the normal relation between cost 
and price shows. 

Largely as a result of the attempt to use cost of pro- 
duction as a basis for a determination of milk prices, 
there came into prominence, early in 191 8, what is known 
as the formula method. The Chicago Milk Commission 
had been in session for several months during the close 
of 1 91 7 and the beginning of 191 8, attempting to deter- 
mine a fair price for milk in the Chicago district. After 
taking nearly six thousand pages of testimony the Com- 
mission was really more at sea than when the inquiry 
started. Costs varying from I2.05 to |i2.oo per hundred- 
weight were shown by the producers.^ This variation 
alone showed, in the opinion of the Commission, "the 
impossibility of determining cost of production from such 
evidence." In addition there were all sorts of conflicting 
opinions expressed as to proper methods of charging 
feeds, — whether, for example, feeds were to be charged 
at cost of production or at market price. As a last resort 
the Commission adopted the formula method, which 
had been proposed by Hoard's Dairyman some time 
earlier.^ 

The formula plan was based upon the assumption that 
the relative quantities of the different elements going to 

^ See Price Fixing by a Price Fixer, F. W. Taussig in Quar. Jour, of Econ., 
Vol. XXXIII, Feb., 1919, p. 219. 

^ Report of Commission, Milk News, Feb., 1918, p. i. 
3 Hoard's Dairyman, Dec. 14, 19 17, p. 732. 



MILK PRICES lot 

make up the total feed and other costs of milk production 
remained constant in a given district, only the values of 
the different items changing from time to time. The 
formula adopted was based on a study, covering a period 
from 1908 to 1915, inclusive, of 36 Illinois farms, including 
873 cows.^ This study showed the following average costs 
of producing 100 pounds of 2-5 P^^ ^^^^ milk in terms of 
feed and labor: 

22 pounds home-grown grain 
22 pounds purchased grain 
50 pounds hay 
188 pounds silage 
39 pounds forage 
2.42 hours labor 

These were subsequently rearranged into four groups, as 
shown below. 

Knowing the quantity of each of the various items 
entering on the average into the production of 100 pounds 
of milk, and having ascertained the average price of each, 
as well as the average price farmers received for their 
milk during the basic eight-year period, the Commission 
proceeded to determine what should be the current value 
of milk at the new feed and labor value. It was assumed 
that prices of milk had been sufficient to cover costs and a 
profit during this basic period, for "it would appear from 
the testimony that the dairy industry in the Chicago 
District had been a reasonably successful industry during 
a normal period of eight years preceding the war period. 
Lands had increased in value — improvements had oc- 
curred. The financial worth of those engaged in the 
industry had materially improved. That profits had not 

^Hoard's Dairyman, Mar. i, 1918, p. 238. 



202 THE MARKETING OF WHOLE MILK 

been excessive is indicated by the normal increase in sup- 
ply to fill the demand. Because of the nature of the in- 
dustry, had profits been excessive, an over-supply would 
have followed; had they been unsatisfactory, a shortage 
would have been the result." ^ 

It was found that the relative weight of each of the 
four groups of items based on average values during the 
eight-year basic period was as follows: 

Relative weight Item 

19 Home-grown grains 

19 Mill feeds (wheat, bran, wheat middlings, hom- 
iny, cotton seed meal, oil meal, gluten feed, dry 
salt) 

35 Hay (including silage valued at the ratio of 3 tons 

of silage to i ton of hay) 

27 Labor 



100 



Variations in the prices of these four units were agreed 
to "represent with sufficient accuracy, when applied, 
according to the above ratio, the increase or decrease in 
the cost of production of milk." ^ It was found that in 
November, 1917, corn, representing home-grown feeds, 
had increased in price 179 per cent over the basic period; 
mill feeds had increased 81.8 per cent; hay 40 per cent, 
and labor 50 per cent. Applying these percentages to 
the old percentages the Commission got as a new index 
the following: 

^ Milk News, Feb., 1918, p. i. 

* Ibid.t p. 2, Report of Commission. 



MILK PRICES 203 

Basic Index New Index 

Corn 19 S3-OI 

Mill feeds 19 34-41 

Hay 35 49.00 

Labor 27 4° • So 



Total 100 177 

The average November price of milk during the eight- 
year period had been I1.768 per hundredweight. Multi- 
plying this figure by 1.77 gave $3.13, the proposed price 
for November milk. In the same way prices of milk for 
succeeding months were determined by multiplying the 
eight-year average price for the respective months by 1.77. 

Three of the nine members of the Commission, however, 
refused to sign the report and issued a minority report 
dissenting from the opinion of the other six members and 
characterizing the findings as unfair to the producers. 
The producers, in fact, were so incensed over the final 
findings that very many of them refused to send milk at 
the established prices.^ The dissatisfaction arose out of 
the application of the formula rather than out of the 
scheme itself. Dean Eugene Davenport, of the University 
of Illinois, in fact, resigned from the Commission, but 
stated in his letter of resignation that he approved of the 
formula, which he thought would "with very great accu- 
racy" express the rise and fall in feed and labor costs "if 
properly used upon an adequate base." ^ The latter point, 
he felt, had not been observed, since the basic period was 
one of decided unrest among the producers, as was ev- 
idenced by the rise during that period of the Milk Pro- 

* Hoard's Dairyman, Feb. 15, 1918, p. 148. 
2 Ibid., Mar. i, 1918, p. 238. 



204 THE MARKETING OF WHOLE MILK 

ducers' Association, an organization built up to overcome 
adverse price conditions. 

The formula was, however, adopted as a base of price 
determination on March i, but only after considerable 
modification. This modification consisted mainly in 
bringing up to date the figure 177, representing the per- 
centage of increase over the basic period, thus making it 
181 for March, so that the producers got in March $3.10 
instead of $2.83, as first awarded. Succeeding months 
were then to be based on further changes in the prices 
of the various items. ^ The formula method was then 
actually used for a number of months, when it was further 
revised, this time in such a way that the current values of 
the commodity costs of producing 100 pounds of milk 
should directly equal the value of 100 pounds of milk. 
These commodity cost items were to be: 

20 pounds home-grown grains 
24 pounds manufactured feeds 
no pounds hay 
3 hours labor 

After ascertaining the current values of these items 
from the Department of Agriculture reports and from 
current market journals,^ the total value of these quan- 
tities was to be considered the value of the milk. In order 
to allow for seasonal variations in the prices of milk, the 
following percentage scale was to be applied to the basic 
price to determine the actual price for the month under 
consideration. 3 

^ Duncan, C. S., Jour, of Pol. Econ., Apr., 1918, p. 314. 

2 See Milk News, July and August, 1918, p. 2, for detailed method of deter- 
mining these values. 

3 Ibid. 



MILK PRICES 20S 

Per cent 

January 117 

February 112 

March 105 

April 95 

May 80 

June 70 

July , 85 

August 95 

September 100 

October 107 

November 115 

December 119 

As thus revised, the plan was used as a price deter- 
minant for a number of months. At the present time it 
is used chiefly as a starting point or basis for collective 
bargaining. 

Similar methods of arriving at milk prices were tried in 
a number of sections, particularly in New York City, 
where the so-called Warren Formula was used. The milk 
boycott of January, 1919, was a direct result of the at- 
tempt on the part of the Dairymen's League to use this 
formula. At the present time this method has practically 
been abandoned as a direct price determinant. The main 
reasons for its failure seem to have been the following: 
(i) Prices and costs do not coincide at given times and 
places, even though on the average there is a relatively 
close relationship between seasonal costs and prices of 
milk; ^ (2) as prices of the various items of cost entering 
into milk production change, farmers are likely to change 
the proportions used, thus vitiating the formula; (3) other 
changes may have occurred at the same time costs were 

^ See Figure 9. 



2o6 THE MARKETING OF WHOLE MILK 

changing, thus making other types of farming so much 
more profitable that farmers would not be satisfied with 
the same rate of profit as prevailed in the basic period. 

The formula method should, however, be a valuable 
guide in price determination in connection with collective 
bargaining, particularly if its basic elements are kept up 
to date, so that the formula will accurately show current 
changes in major costs from time to time. 

Another proposal that has been made for price deter- 
mination by a ready method is to take prices of certain 
regularly quoted commodities, like butter, cheese, or 
butter and corn as a basis. It should be pointed out, how- 
ever, that butter is, to a large extent, produced in sections 
where grain growing is the main enterprise and that butter 
and most other milk products can be stored for long pe- 
riods, and hence their prices would tend to be more uni- 
form as between seasons of shortage and surplus than are 
milk prices. 

In the Minneapolis-St. Paul market during the year 
1919 and well into 1920, the cheese market has been the 
basis of prices, but, owing to the unnatural behavior of 
cheese prices in 191 9, this basis has proven unsatisfactory 
and will either be given up or revised. The plan is thus 
described by one of the officers of the Twin City Milk 
Producers' Association: ^ 

"In the fall of 1918 we began to base our price of milk 
on the Plymouth, Wisconsin, cheese market. We averaged 
the quotations of Twin Cheese on the Plymouth market 
each month, multiplied them by 10, assumed a 10 pound 
yield of cheese per 100 pounds, and added a differential of 
70 cents per hundred pounds, to cover the cost of trans- 
portation to the dealers' plants, and the value of the whey. 

^ Letter to the writer, Mar. 29, 1920. 



MILK PRICES 207 

"Beginning August i, 1919,-^6 used and are still using 
a sliding differential, varying from 40 to 60 cents per 
hundred pounds, in order to make some allowance for 
the variation in supply. During the past few months, 
on account of the cheese price being so much lower than 
butter, we have not been at all satisfied with our present 
price basis. When our present contracts expire July 31, 
we hope to base our price either on butter or cheese, with 
a sufficient differential added to make a price somewhere 
near the cost of production." 

In the New York City district, beginning April, 191 9, a 
similar plan was tried, but seems to have proved inade- 
quate. In the spring of 1920, when milk prices fell out of 
line with prices of butter and cheese, the milk dealers 
refused to continue to use the plan.^ The producers re- 
jected a plan proposed by the dealers, and there the matter 
stands (June, 1920). It is likely, however, that some 
modification of the method will be used in the future. 
The basis was the New York butter and cheese prices.^ 
The butter price taken was the average of daily prices of 
92 score butter on the New York market for one month. 
Allowing for 4.176 pounds of butter in 100 pounds of milk 
{2.6 per cent milk at 16 per cent overrun), the butter value 
of milk could be calculated. Thus the January, 1920, 
price of milk was computed on December 20 by averaging 
butter prices from November 20 to December 19, which 
gave an average butter price of $0,732 per pound, making 
$3.06 for 100 pounds of milk. Adding $1.16 as the value 
of skim milk per 100 pounds of whole milk gave a value 
of $4.22 as the total butter and skim milk value for Jan- 

^ Dairymen's League News, Mar. 25, 1920, p. i. 

2 Milk Reporter, Jan., 1920, for detailed methods of calculation and price 
schedules. 



2o8 THE MARKETING OF WHOLE MILK 

nary. A table was prepared (Schedule "A") to show the 
value of butter, of skim milk, and of whole milk based on 
different butter and skim milk prices. This table assigned 
to the skim milk in one hundredweight of whole milk 
values varying from 20 cents, when butter was 25 cents 
per pound, to ^1.30, when butter was 80 cents per pound. 
The average cheese price for the same period was ^0.3191 
Allowing for 9.68 pounds of cheese to be made from 100 
pounds of ;}.6 per cent milk, and adding for the value 
of whey in 100 pounds of whole milk approximately 22 
cents, a total of $3.31 was secured as the cheese basis value. 
The values assigned to whey varied from 10 cents for the 
whey in 100 pounds of whole milk, when the cheese price 
was 10 cents per pound, to 25 cents, when cheese was 37 
cents per pound. The butter price of $4.22 and the cheese 
price of ^^3.31 were averaged, giving a butter-and-cheese 
price for milk of I3.77 for 2-^ per cent milk. To this was 
added an arbitrary differential of 16 cents for the month 
of January, making the price of milk $3.93 in the 200-210 
mile freight zone. Differentials for the various months, 
were: ^ 

January plus 16 cents 

February plus 16 cents 

March plus 16 cents 

April minus 15 cents 

May minus 15 cents 

June minus 15 cents 

July plus 16 cents 

August plus 36 cents 

September plus 36 cents 

October plus 26 cents 

November plus 26 cents 

December plus 26 cents 

^ Milk Reporter, Jan., 1920. 



MILK PRICES 



209 



Table XXXVII brings out the usual relationship be- 
tween prices of butter, cheese, and milk, as well as milk 
prices based on butter and corn prices. Column 3 in Table 
XXXVII shows the percentage monthly variation in milk 
prices in Chicago, 1908-1915. In columns i and 2 are 
butter and cheese prices for the same period. 



Table XXXVII 

Relative Monthly Prices of Butter, Cheese, and Milk Based on Chicago 
Market, igo8-igis, and of Milk Based on Butter and Corn Prices'^ 



Butter 



Cheese 



whole milk 



Butter y corn 



January . . . . 
February . . . 

March 

April 

May 

June 

July 

August 

September. . 
October. . . . 
November. . 
December. . 
Average 



109.7 

103. 5 

102.2 

98.9 

91.0 

90.3 
89.6 
91.0 
96.8 

lOI.I 

109.0 
116. 1 



103.6 
106.7 
106.7 
100.7 
94.0 
93 o 
93-7 
975 
98-3 
995 

lOI.I 

103.6 
100 



118. 3 

114. 4 
106. s 

93-5 
77.1 
69.9 
83-0 
94-7 
97-4 
107. 1 

II5-7 
118. 3 

100 



104.9 

lOI.O 

100.2 
98.7 
93-2 
94.0 
94.0 
95-6 

lOI.O 

102.3 
104.9 
109.5 

100 



It will be noticed that whereas milk varied from a low 
of 69.9 to a high of 11 8.3, butter varied from only 89.6 to 
1 16. 1, and cheese from 93 to 106.7. To tabulate more 
concisely, we get the following comparison: 



Cheese Low. . 


..93.0 


High.. 


. .106.7 


DiflFerence. . 


••13-7 


Butter Low . . 


..89.6 


High.. 


. .116.1 


Difference. . 


. . 26 . 5 


Milk Low. . . . 


..69.9 


High.. 


. .118.3 


Difference. . 


..48.4 



^ Pearson, F. A. Farm Econ. Jour., Oct., 1919, p. 94. 



2IO THE MARKETING OF WHOLE MILK 

The main difficulty, however, is not to be found in the 
fact that the fluctuations occur at different rates, for 
these could be counterbalanced by the use of differentials 
for each of the various months, much as the Dairymen's 
League has worked our differentials in connection with 
its attempt to use the butter-cheese basis. The real 
difficulty would come from the fact that butter and cheese 
prices so often fluctuate more or less independently and 
at certain times may be considerably at variance with 
their usual position relative to milk. Note for example 
irregularities shown in the chart comparing New York 
milk and New York butter extras for a period of twenty 
years. (Figure 14.) The chart represents relative prices, 
and hence milk and butter are directly comparable. It will 
be noticed that milk almost invariablygoes higher in winter 
and lower in summer than butter and that it does so in such 
an irregular manner that it is extremely doubtful whether 
this basis would be satisfactory to both producers and 
dealers for any length of time, even in normal times. 
Notice particularly for some of these irregularities the 
winters of 1907 and 1908, 1910 and 191 1, and the winter 
and spring of 191 2-13. 

Another proposal, brought forward in the condensery 
district of Wisconsin, is that of basing milk prices on 
prices of butter and corn. According to this plan, the 
butterfat in milk is to be paid for on the basis of butter 
prices, while an allowance is to be made for the skim milk 
in 100 pounds of milk on the basis of its feeding value as 
compared with corn. Column 4 in Table XXXVII gives 
the monthly variation in milk prices based on prices of 
butter and corn. One hundred pounds of milk is to be 
considered worth the number of pounds of butterfat in 
the milk times the Chicago market price of 92 score butter. 

















































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212 THE MARKETING OF WHOLE MILK 

plus a differential of 6 cents for fat over butter, to which 
is added the value of 85 pounds of skim milk. The latter 
is to be determined on the basis that 100 pounds of skim 
milk should be equivalent to one-half the price of a bushel 
of corn.i 

A somewhat similar plan has been in use for a number 
of years by an Ohio company which sells large quantities 
of sweet cream in a wholesale way to ice-cream manu- 
facturers, milk dealers, and others. This company has 
paid for the butterfat a price based upon, and usually 
several cents above, Chicago butter extras. An additional 
price is then paid for the skim milk in 100 pounds of whole 
milk. 

On the whole it is doubtful whether any ready method 
can be found for arriving at prices in our large market 
centers at any given time by any simple formula or basic 
commodity-price method. All of these methods, however, 
may be very useful at times as aids in arriving at prices 
for current months. 

Figures 15 to 29 show the movement of milk prices paid 
to producers in various parts of the United States from 
1913 to 1919, inclusive. The prices upon which the curves 
are based are not in all cases comparable, since they often 
represent different things. (See also Chap. II, Sec. 7.) 
The Springfield, Ohio, Columbus, Ohio, and Pittsburg 
prices are for 4 per cent milk, whereas the others are for 
milk varying from ^.^ to 3.7 per cent. The Cleveland, 
Toledo, New York, and Pittsburg prices are country prices, 
whereas the Springfield, Columbus, Philadelphia, San 
Francisco, Chicago, and New Orleans prices are city 
prices. We are here interested mainly, though not wholly, 
in price movements during the period under consideration. 

1 F. A. Pearson, Jour, of Farm Econ., Oct., 1919, p. 93. 



MILK PRICES 



213 



Eleven cities are compared with the average of ten of the 
leading cities. These ten are Milwaukee, Chicago, New 
Orleans, Pittsburg, Philadelphia, San Francisco, Detroit, 
Baltimore, New York, and Cleveland. 



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Fig. 15. — Relative Average Prices Paid to Milk Producers in Ten Cities, and Relative 
Prices of "All Commodities." 

In several instances during the early part of the period 
the prices seem to have changed only two or three times 
during the year. This seems to have been particularly 
true in New Orleans, Philadelphia, San Francisco, Spring- 
field, Ohio, and Columbus, Ohio. 



214 



THE MARKETING OF WHOLE MILK 











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2i6 THE MARKETING OF WHOLE MILK 

Figure 15, comparing prices of milk in the ten cities 
with the "all commodities" index of the War Industries 
Board, ^ shows that milk prices lagged behind other prices 
from the middle of 191 5 to near the end of 1917, and in 
fact even during 191 8 and 191 9 they were not quite up to 
the level of other prices. 

Figure 16 compares the price in Pittsburg, Chicago, 
and New Orleans with the ten cities average. Pittsburg 
and New Orleans show somewhat greater gains than does 
Chicago. In Figure 17 Philadelphia apparently main- 
tains its position relative to the average rather steadily. 
During the early years of the period the seasonal fluctu- 
ations were not nearly so violent as were those of most 
of the cities. During the early war period of 1917 the 
Philadelphia price was considerably above that of the ten 
cities. The New York prices rose somewhat more rapidly 
than the average during 191 6 and 1917. 

Figure 18 compares Toledo and Cleveland with the ten 
cities average. It is interesting to note the fluctuations 
in the Toledo curve. Toledo is a condensery center, and 
this fact is reflected in the high prices paid during most 
of 1 91 7, when the price at times went above the ten cities 
average, although normally it was below. Again, in the 
spring of 191 8, the Toledo price slumped badly, since at 
this time condensery markets were poor owing to curtail- 
ment of exports. 

Figure 19 compares Springfield and Columbus, Ohio, 
with the ten cities average. During the last half of the 
seven years Springfield prices have perhaps approached 
somewhat the ten cities average, whereas Columbus prices 
have, if anything, fallen slightly below the ten cities aver- 
age. 

^ Bureau of Labor Statistics figures for 1919 were used. 



MILK PRICES 



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MILK PRICES 219 

Figure 20 compares the San Francisco and Portland 
(Ore.) prices with the ten cities average. In both of these 
cities the producers have apparently lost ground slightly 
in the upward price movement. Both started in 19 13 some- 
what above the ten cities average, and both fell somewhat 
below it in the latter part of the period. 

Can milk producers' associations influence milk prices? 
Temporarily they can undoubtedly do so. At least they 
have repeatedly done it. In the Chicago district in the 
spring of 191 6, for example, the Chicago Milk Producers' 
Association was directly responsible for securing an in- 
crease of 22 cents per 100 pounds for the summer months. 
Similarly the Dairymen's League in the New York district 
secured a material advance in October and November 
of the same year. Undoubtedly such associations can be 
of tremendous service to the members in bringing about 
better prices at unfavorable times, particularly if suffi- 
ciently fortified with adequate and reliable data with 
which to justify their claims before consumers. On the 
other hand, how far can they go ? The answer will depend 
upon the accuracy with which the producers have judged 
conditions of supply and demand in deciding upon the 
price they are going to ask. If, as a result of thorough 
organization, they succeed in securing too high a price, 
a surplus will result either from increased quantities of 
milk seeking the market for any of the reasons above 
given, or from a reduced demand. This would be true 
even though the milk producers all over the United States 
were thoroughly organized, for it must be remembered 
that there are in any large milk territory enough men who 
can turn to the production and sale of milk to cause a 
serious surplus should prices go too high. Many specific 
instances might be mentioned where cities whose prices 



220 



THE MARKETING OF WHOLE MILK 















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MILK PRICES 221 

were slightly out of line with other markets at once got 
too much or too little milk. Producers' organizations have 
been very active during the past few years; yet a study of 
the charts showing milk prices from 1913 to 191 9, inclu- 
sive, shows a rather remarkable similarity in the curves 
for the various cities. 

Enthusiastic officers of producers' associations and 
others have often made extravagant claims as to gains 
resulting from collective bargaining. One writer, for 
example, has made a comparison of milk prices in the 
Chicago district for the year ending September, 1917, 
and for the year ending September, 191 8, and claims for 
his association the credit for the entire gain over the pre- 
ceding year.^ Table XXXVIII compares the average 
Chicago prices for the two years with a number of other 
prices covering the same period. The Chicago milk price 
was 2S'^ per cent higher in the second year, while the in- 
crease in the ten cities average was 40.3 per cent. During 
the second period New York butter prices were 16 per 
cent higher; the United States Department of Agriculture 
Index Number of Crop Prices was 18.4 per cent higher; 
the United States Department of Agriculture Index of 
Prices of Meat Animals was 28.7 per cent higher, and the 
"all commodities" index compiled by the War Industries 
Board was 15.4 per cent higher. If any gain to is be 
accredited to this particular association, it should be the 
difference between its gains and those of other commo- 
dities, such as New York butter prices, crop prices, or "all 
commodities" prices, and this credit would have to be 
shared with other associations, since it was doubtless the 
concerted movement of milk producers' organizations oveir 

^ Milk News, Sept., 1918, p. 8. 



222 THE MARKETING OF WHOLE MILK 

the entire country that helped bring milk prices somewhat 
nearer to the level of other prices. Certainly a study of 
the price charts offers little ground for any fears on the 
part of consumers that they are in the hands of a "milk 
producers' trust," as our daily papers sometimes charge. 
And this fear will continue groundless so long as every 
man is relatively free to go from one line of farming to an- 
other as he finds one or another more profitable, or to 
increase or decrease his milk production as he sees fit. 
Herein is the big difference between a true monopoly and 
a farmers' organization as at present constituted. The 
monopolist — a manager or a board of directors of a large 
corporation — decides to curtail production so as to realize 
a higher price. The entire control of the quantity to be 
produced is centralized. In a farmers' organization — 
be it a milk producers' association or a cotton growers' 
organization — each member is a law unto himself. Each 
may contract to sell all he produces through his organi- 
zation, or he may even contract to produce only a cer- 
tain amount. But with millions of scattered producers, 
monopoly methods would seem to be impossible, ex- 
cept for very short periods, say a few months or a 
year. 

Perhaps one of the biggest weaknesses of producers' 
organizations of to-day is that the members expect to 
accomplish too much along the line of price increases and 
become discouraged if appreciable increases are not forth- 
coming. 

Sectional variations in prices have often been com- 
mented upon as though they were wholly due to differ- 
ences in the bargaining ability of organized producers 
in one section as compared with unorganized producers 
in another. This is undoubtedly the fact to some extent. 



MILK PRICES 



223 



Compare, for example, prices at Toledo and Minerva, ^ 
both of which are practically condensery prices, but influ- 
enced by city conditions. (See Appendix D.) It is very 
likely, however, that more deep-seated causes are at the 
bottom of the differences than have been shown by studies 
so far made. That there are rather wide variations and 
that these are not always the same from year to year is 
shown in Table XXXIX, giving prices for the months 
of May, 1 91 9, and May, 1920. 



Table XXXVIII 

Comparison for Year Ending September, 1917, and Year Ending September, 1918, 
of Chicago Milk Prices, Ten Cities Average Milk Prices, New York Butter 
{Creamery Firsts), United States Index of Crop Prices, United States Index of 
Prices of Meat Animals 



Chicago 
milk 
prices 



of milk 
prices 
in ten 
cities 



Average 
N.Y. 
butter 2 
prices 



U.S. 

index 

number, 

crop 
prices ^ 



U.S. 

index 
number, 

meat 
animals * 



All 
commo- 
dities ^ 



Average, year ending 
Sept., 1917 

Average, year ending 
Sept., 1918 

Per cent of increase.. . 



$2,060 

2.793 
35-6 



$2 . 292 

3.22s 
40-3 



^■393 

0.456 
16.0 



232.5 

275.3 
18.4 



10.36 

13-33 
28.7 



163.8 

188.9 
iS-4 



^ Toledo, in northwestern Ohio, is in the heart of a condensery district in 
which producers have been almost entirely unorganized. Minerva, Ohio, is a 
small ^condensery center in the edge of the Pittsburgh milk zone, where pro- 
ducers!^ are well organized. 

^ Creamery firsts, PTar Industries Bulletin 21, p. 21. 

^ Monthly Crop Reporter, Mar., 1920, p. 29. 

* Ibid., Feb., 1920, p. 9. 

* War Industries Bulletin 2, p. 7, average of monthly indices of 1,371 com- 
modities. 



224 THE MARKETING OF WHOLE MILK 



Table XXXIX 

Average Milk Prices by Geographic Sections for May, igig and IQ20 in Identical 
Cities, and Averages for the year 1919 ^ 



Geographic sections 



Comparison of same markets Average for 1919 



No. of 

local 

markets 



May, 
1920 



May, 
1919 



No. of 

local 

markets 



Average 
price for 
city de- 
livery 



United States.. 
New England. . 
Mid. Atlantic. . 
E. No. Central. 
W. No. Central 
So. Atlantic. . . 
E. So. Central. 
W. So. Central. 

fountain 

Pacific 



3>039 
265 

1,219 
584 

329 
144 

120 

74 
121 
213 



$2.99 
3.42 

3-13 
2.61 
2.72 

391 
2.87 
4.02 
3. II 
3.23 



590 

68 

109 

189 

81 

S3 

9 

23 

18 

39 



•SO 
■77 
•3S 
•25 
.21 
.03 
.40 
•07 
.12 
■36 



Table XL 

Comparison of Average Prices of Milk for City Delivery and for Condensery 
Purposes by Geographic Sections, 1919 



Geographic section 



For city delivery 



No. of 
markets 



Price 



For condensery 



No. of 
markets 



Price 



United States. . 
New England... 
Mid. Atlantic . . 
E. No. Central. 
W. No. Central. 
So. Atlantic. . . . 
E. So. Central.. 
W. So. Central. 

Mountain 

Pacific 



590 

68 

109 

189 

81 

S3 

9 

23 

18 

39 



•SO 
■77 
-3S 
•25 
.21 
.03 
•40 
•07 
.12 
.36 



244 

S 

82 
105 

ID 

4 



14 
24 



^ U. S.Bureau of Markets, Fluid Milk Market Reports, Mar. and May, 1920. 



MILK PRICES 225 

It must be remembered in making comparisons that 
the past year has been abnormal in many respects and that 
furthermore this is the first full year for which we have 
accurate data upon which to base such comparisons for 
the country as a whole. ^ 

Table XLI compares the estimated returns on milk 
sold for cheese or butter manufacture with averaged 
prices received for milk sold for city delivery and for 
condensery purposes by months. It will be noticed that 
the prices received for city milk were highest, cheese com- 
ing second, condensed milk third, and butter fourth. It 
is probable that condensed milk would ordinarily come 
second in a more normal year, for condenseries have 
usually been able to drive cheese factories out of the im- 
mediate vicinities in which the condenseries were located. 
(See Figure 5, showing location of abandoned cheese fac- 
tories about Monroe, Wisconsin.) 

The prices given in Table XLI on p. 226 are the simple 
average prices (not weighted average prices), and represent 
the price received for milk testing ^-S V^^ cent butterfat. 

Although only a small proportion of the total milk pro- 
duced is required for condensery purposes (about 4.45 per 
cent in 191 8, see Chapter II, Section i), it is a considerable 
factor in the determination of whole milk prices, since so 
large a proportion of the condenseries are located in or 
near our city milk sheds. When the foreign demand for 
condensed milk fell off early in 1920, owing to the unfavor- 
able rate of exchange, milk prices began to tumble, partic- 
ularly in the New York and Chicago districts. ^ 

^ The U. S. Bureau of Markets began its market milk reporting service in 
the summer of 1918. 

2 Milk News, Mar., 1920, p. i, and Dairymen's League News, Feb. 25, 1920, 
p. I. 



226 THE MARKETING OF WHOLE MILK 



Table XLI 

Prices by Months Received by Farmers for Milk Sold to Condenseries, Milk Sold 
to City Distributors, and Estimated Returns for Milk Sold to Creameries and 
Cheese Factories ^ 



Month 



January 

February 

March 

April 

May 

June 

July 

August 

September 

October 

November 

December 

Average mon. prices 



City dis- 


tribution 2 


^3 -81 


3 


ej 


3 


46 


3 


27 


3 


22 


3 


18 


3 


17 


3 


44 


3 


54 


3 


71 


3 


79 


3 


81 


3 


SO 



Condensing^ 



^3-43 
3.28 

2-93 
2.79 
2.70 
2.71 
2.80 

3-OS 
3.12 

3-24 
3-56 
3.48 



2.91 



Cheese manuA Butter manu- 
facturing * \ facturing ^ 



$3.40 
2.60 
3-05 
2.9s 
3.10 

3-13 
3 -IS 
2.99 
2.82 

2.97 
3-13 
3-13 



3 04 



^3-03 
2.68 
3.02 
3.12 
2.90 
2.69 
2.72 
2.80 
2.92 
3.22 
3-35 
3-39 



Section j. Determination of City Milk Prices 

City prices themselves are complex and are determined 
by a complex set of forces. Milk usually sells in our large 
cities in four distinct classes. These are (i) retailed 
bottled milk delivered at the homes, (2) bottled milk 

1 Market Reporter, Apr. 17, 1920, p. 253. 

2 Average net prices compiled from fluid milk market reports issued monthly 
by the Bureau of Markets. 

' Average net prices compiled from monthly condensed milk market report 
issued by the Bureau of Markets. 

* Average net price approximated by multiplying Plymouth (Wis.) Cheese 
Board price of twins by 10 and adding 15 cents as compensation for value of 
whey. 

^Average net price approximated by multiplying the average monthly 
quotation of 92 score butter on the New York market plus 3 cents by the basic 
butterfat content of milk (3.5 per cent) and adding 75 cents as compensation for 
the skim milk used on the farm. 



MILK PRICES 



227 









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228 THE MARKETING OF WHOLE MILK 

retailed at stores and milk stations, (3) bottled milk 
wholesaled to hotels, restaurants, and stores, and (4) bulk 
milk at wholesale to hotels, restaurants, manufacturers 
of various products requiring milk, such as bakeries, candy 
makers, etc. 

The various city prices may be thought of as being 
built up from the basic wholesale prices at which milk is 
purchased from producers, since, as pointed out in the 
preceding section, it is at this earlier stage that the various 
demands for milk make themselves effective in drawing 
milk into the particular channels in which the demand 
at the time happens to be strongest. 

In each of the various classes of city trade, however, 
prices are determined, to a large extent, by separate and 
interacting forces. Thus wholesale prices of bulk milk 
may be entirely out of line apparently with wholesale 
prices of bottled milk, whereas retail prices are at other 
times apparently out of line. In Table XLII are shown 
prices paid to producers in June and December of 1919 
in each of ten cities. Column 1 gives the retail price to 
the family trade, and column 3 the margin which the 
dealers took above prices which they paid producers. It 
will be noticed that the June margins vary from 5.50 cents 
per quart to 8.34 cents per quart, and the December mar- 
gins vary from 4.45 cents to 7.12 cents. 

In columns 4 and 5 are prices paid by the stores and 
other wholesale purchasers of bottled milk and the dealers' 
margins on this class of trade. These margins are from 
I to 2 cents lower than the margin on the retail trade, 
since both the retail and the wholesale bottled prices are 
usually given in whole cents, the latter prices being usu- 
ally I or 2 cents below the retail delivered prices. Again 
there is no uniformity in the margins, which in this case 



MILK PRICES 



229 



Table XLII — Prices Paid Producers, Selling Prices of Retail Bottled Milk, 
Wholesale Bottled Milk, and Wholesale Bulk Milk per Quart, and Selling 
Margin on Each Class of Sales in Ten Cities for June and December, iQig ^ 



City 



Los Angeles 

June 

December 

Denver 

June 

December 

Des Moines 

June 

December 

Milwaukee 

June 

December 

Chicago 

June 

December 

Detroit 

June 

December 

Pittsburg 

June 

December 

Philadelphia 

June 

December 

New York 

June 

December 

Washington, D. C. 

June 

December 



Produ- 



pnce 



cts. 



7-9 
.08 



o 
IS 

31 

84 

78 
S5 

25 
92 

66^ 
70 

87 
95 

SO 
46 

17 ^ 
29 



7.88 
II. 10 



Retail family 
trade 



Price 
cts. 



14.0 
16.0 

13.0 
13.0 

14.0 
15.0 

12.0 
13.0 

14.0 
ISO 

iS-o 
16.0 

13.0 
16.25 

13.0 
14.0 

15.0 
18.0 

14.0 
18.0 



Margin 
cts. 



Wholesale 
bottled 



Price 
cts. 



13.0 
IS-O 

II. o 

12.0 

12.0 
13.0 

II. o 

12.0 
14.0 

14s 

14.0 

IS-O 

12.50 
15-25 

12.0 
13.0 

15.00 
17-75 

12-S 
155 



Margin 
cts. 



Wholesale 
hulk 



Price 
cts. 



12-5 
13-3 

8-75 
9-37 

10.5 
11-25 

9-5 

10.5 

10. o 
12.25 

II. o 

13.0 

925 
13-25 

10.75 

ii-S 

10.25 
13.0 

11-75 
IS-O 



Margin 
cts. 



60 



1 U. S. Bureau of Markets figures as reported in Creamery y Milk Plant 
Monthly of July, 1919, and of Jan., 1920. 
* Fluid milk only. ^ Country milk station price. 



230 THE MARKETING OF WHOLE MILK 

vary from 4.22 to 7.75 cents in June to from 3.45 to 6.92 
cents in December. Wholesale bulk prices are as a rule 
quoted by the gallon. The margins per quart in this case 
above prices paid to the producer are usually a cent or 
two lower than wholesale bottled prices. In this case the 
margins vary from 2.38 to 4.60 cents in June and from 
1.95 cents to 5.22 cents in December. 

It is obviously true that the price to each of these vari- 
ous classes of trade is not based exactly on the cost of the 
service involved. Costs vary for different dealers, some- 
times rather widely, since here as elsewhere there are 
all degrees of efficiency and almost every conceivable 
combination of trade, from entirely retail businesses to 
entirely wholesale bottled or wholesale bulk businesses; 
but prices for each of these classes of trade are usually 
established with a fair degree of definiteness in any large 
city. The particular point at which price is established 
will be determined independently for each of these classes 
of trade somewhat by the relative costs, but perhaps more 
immediately by conditions of supply and demand and to 
a lesser extent by custom. The wholesale bulk trade, as 
well as the wholesale bottled trade, is frequently the 
starting points of price wars, since it is easy to make cuts 
on prices of milk in large quantities. In fact dealers often 
underbid each other in an attempt to sell all of their sur- 
plus milk. 

It is claimed that in Pittsburg and Philadelphia from 
90 to 95 per cent of the bottled milk is sold from retail 
wagons. This is a much higher percentage than is com- 
monly found and is claimed to be partially responsible 
for somewhat lower costs of distributing milk in Pitts- 
burg and Philadelphia. 1 

^ King, Clyde, L., The Price of Milk in Pittsburgh, p. 17. 



MILK PRICES 



231 



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232 



THE MARKETING OF WHOLE MILK 



City prices have not fluctuated as widely as have prices 
to producers. Perhaps the main reason for this is the fact 
that milk consumption is so largely a matter of habit and 
that dealers find it to be rather expensive to bring back 



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i „_ /3/J 1 «/<■ 1 /9IS \ /a« 1 . ., 1917 1 /3>9 1 IS/9 1 



Fig. 23. — Relative Wholesale and Retail Milk Prices, Pittsburgh, Pennsylvania. 

consumption to a normal rate in case an increase in price 
has for a time reduced the consumption. Another reason 
is that the demand for fluid milk is relatively inelastic, 
hence consumers would not, even with a very large cut 
in prices, take enough more milk than they ordinarily do 



MILK PRICES 



233 



to make any material reduction in the summer surplus. 
Therefore dealers have operated on very narrow margins 
at certain times during the winter months, the aim being 
to make a profit on the season's business rather than to 



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make a profit on each month's business.^ Where these 
margins have been at all wide for any length of time, there 
has been a strong tendency for small dealers to cut under, 
often bringing on milk price wars. Even where prices 

^ See Figure 21 for relative retail and wholesale prices in ten cities. 



234 



THE MARKETING OF WHOLE MILK 

































































































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236 THE MARKETING OF WHOLE MILK 

have been relatively low and margins correspondingly 
small, milk price wars have occasionally resulted from an 
attempt on the part of a new concern, or in fact of any 
concern, to win business by cut-price methods. For ex- 
ample, Milwaukee had 7 cent milk from 1913 to 1914, 
which price was about 1.5 cents below the average of the 
ten cities above named. ^ Early in 191 5 a new company 
was organized which sought to gain business by cutting 
prices, thinking the prevailing margin to be too wide. The 
result was a price war and 6 cent milk for seventeen months. 
Prices were for the most part at that time about 2.5 cents 
below the other nine cities. Another instance in point is 
the milk war in Columbus, Ohio, in the winter of 1919-1920, 
which resulted because one dealer sought to gain favor 
and business by remaining at 14 cents per quart when 
most of the other dealers raised their retail price to 15 
cents. The result was that the other dealers soon came 
down to 14 cents. Later it was claimed that this margin 
was so narrow that many of the dealers suffered losses, 
that none made reasonable profits, and that prices will 
Jiave to go up in the near future.^ 

It is difficult to say to what extent producers* organi- 
zations have had an influence on city retail prices. It is 
true that where producers have at certain times secured 
material advances in prices paid to them, the dealers ha^e 
at once raised the prices to consumers in the varioiis 
classes of trade. Figures 26, 27, and 28 show the average 
retail prices in ten cities as reported by the United States 
Bureau of Labor Statistics compared with those of a num- 
ber of individual cities. 

1 Milwaukee, Chicago, New Orleans, Pittsburg, Philadelphia, San Francisco, 
Detroit, Baltimore, New York, Cleveland. 

2 Prices did go up to 15 cents in Sept., 1920 remaining there until Feb., 1921. 



MILK PRICES 



237 





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THE MARKETING OF WHOLE MILK 





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240 THE MARKETING OF WHOLE MILK 

Producers are apparently getting a somewhat greater 
portion of the consumer's dollar than they did in 1913. 
This is indicated by Figure 21,, comparing the relative 
average prices of milk in ten cities paid to producers and 
paid by consumers. It will be noticed that relatively the 
wholesale prices to producers have gone up somewhat 
more rapidly than have the retail prices. Figures 23 and 
25 show the relative wholesale and retail prices in Pitts- 
burg and Philadelphia respectively. In the case of 
Philadelphia particularly it appears that the dealers' 
margin has been growing relatively narrower. In the case 
of New York (Figure 24) the wholesale price to producers 
has gone up nearly as rapidly as in the case of Pittsburg. 
In Milwaukee, however (Figure 22), the relative retail 
and wholesale prices seem to have remained fairly close 
together, probably because of the fact that the margin 
during the basic period of 1913 was quite narrow in that 
city. 

Milk is not the only commodity, however, in which the 
spread between retail price and wholesale price has be- 
come relatively narrower. The War Industries Board 
reports fifteen commodities on most of which the whole- 
sale price has gone up more rapidly than has the retail 
price. ^ Table XLIII on p. 241 gives the index numbers 
for several of these. 

In Figure 29 a comparison between average retail milk 
prices and average retail prices of twenty-two foods shows 
that relatively milk prices moved upward more regularly 
and more slowly than did prices of other foods. 

^ War Industries Bui. j, pp. 551-55^- 



MILK PRICES 

Table XLIII 

Relative Wholesale and Retail Prices of Foods 
{Note: W = Wholesale, R = Retail) 



241 



Article and city 



for 
1913 



January, 
1919 



April, 
1919 



Beef, Chicago 

Steer, rounds #2 W 

Round steak R. 

Pork, Chicago 

Loins W 

Chops R 

Butter, Chicago 

Creamery extra W 

Creamery extra R 

Milk, Chicago 

Fresh W 
Fresh, bottled, delivered R. 

Milk, New York 

Fresh W 
Fresh, bottled, delivered R. 

Milk, San Francisco 

Fresh W 

Fresh bottled R. 

Eggs, Chicago 

Fresh, firsts W 

Strictly fresh R. 

Corn meal, Chicago 

Fine W 

Fine R. 

Potatoes, Chicago 
White, good to choice W. 

White R. 

Poultry, New York 

Dressed fowls W 

Dressed fowls R- 



100 
100 



100 
100 



100 

100 



100 
100 



100 
100 



100 
100 



100 
100 



100 
100 



100 
100 



100 
100 



168 
168 

181 

i8S 

213 
197 



^7i 

263 
178 

190 
140 

260 
238 

257 
200 

190 

180 

19s 
191 



183 
177 

211 
199 

197 

185 

168 
163 

174 
172 

190 
140 

174 
160 

229 

200 

180 
167 

195 
195 



CHAPTER VII 

CONSIDERATION OF PROPOSED REMEDIES 

Section i. Classification of Remedies 

It has already been shown (Chapter II, Sections 2, 4, 
and 5) that milk is a particularly vital factor in the wel- 
fare of a community. A recent investigating committee 
puts the case thus: "There are increasing numbers of us 
contending that the milk business should be classified with 
the public utilities. In certain age groups, it has been 
pointed out, milk is almost as essential as air and water. 
In the life of the community the consumption of milk is 
infinitely more important th^n the operation of the trans- 
portation lines, the proper management of gas and elec- 
tric plants, the operation of ferries, and the oversight of 
any other function which by common consent has been 
called a public utility and placed under governmental 
control." 1 

Many suggestions for remedying the evils of the milk 
business have been brought forward, someof which will be 
examined in considerable detail. Others have already 
been considered to some extent. The principal remedies 
which have been proposed may be classified under ten 
heads: 

I. Municipal ownership. Ownership and operation by 
the city of all or a portion of the milk business. 

^ Report of Fair Price Committee of the City of New York, New York Legis- 
lative Document No. 29, 1920, p. 37. 

242 



CONSIDERATION OF PROPOSED REMEDIES 243 

2. Privately owned and operated but publicly regulated 
monopoly. Existing companies to combine and form a 
large company. Regulation to be by some body of public 
spirited men representing producers, distributors, and 
consumers. 

3. Cooperation among dealers to eliminate present 
duplication; present competitive system in other respects 
to be retained. 

4. Cooperative distribution by producers. Proposed 
by producers who believe that dealers charge excessive 
prices and thus reduce consumption and then in turn 
hold the surplus thus created as a club to beat down prices 
to producers. 

5. Consumers' cooperation. 

6. The milk commission plan. 

7. The milk arbitrator plan. 

8. Store or milk station plan. Proposed as a method 
of eliminating duplication and cheapening distribution. 

9. Zoning of our cities so as to eliminate duplication. 

10. Collective bargaining as a means of eliminating 
many of the evils of the present system without some of 
the radical changes above suggested. 

Section 2. Municipalization of Milk Distribution 

Municipalization of the distribution of milk has so often 
been proposed that the subject merits rather careful con- 
sideration at this point. ^ Although this proposal has been 

^The following instances in which this proposal has been brought forward 
have come to the writer's attention: 

1. Proposed for Milwaukee, 1914; see Milwaukee Journal, Oct. I, 1914. 

2. Said to have been provided for in Wellington, New Zealand; Savage, Milk 
and the Public Health, p. 368. 

3. Proposed for Cleveland, Ohioj Dayton (0.) Herald, July 28, 1919. 



244 THE MARKETING OF WHOLE MILK 

spoken of as "a passing phase of public opinion," which 
opinion is "notoriously fickle," its proponents in some 
instances have made fairly good cases. 

Can the distribution of milk be considered a public 
function? Various writers have sought to show that it is 
as much so as water supply, gas, or electricity. Spargo, 
for example, seeks to show that impure milk is of more 
danger to children than impure water, the supplying of 
which Is quite generally recognized to be a proper public 
function.^ With regard to milk for infant consumption, he 
goes so far as to say that the municipality should produce 
and distribute at least this portion of the supply.^ An- 
other writer, after citing numerous court decisions to show 
that the supply of water has been considered by the courts 
to be a proper municipal function, compares water and 
milk as follows: ^ 



4. Proposed in Wisconsin legislature, spring of 1919, for Wisconsin cities; 
Creamery tf? Milk Plant Monthly, Apr., 1919, p. 39. 

5. Proposed by Mayor of Jamestown, N. Y., who presented elaborate figures 
in support of his claims of advantages to the city. See American City, Vol. X, 
p. so, Jan., 1914. 

6. Taken up by Chamber of Commerce at Corning, N. Y.; Creamery y 
Milk Plant Monthly, July, 191 8, p. 22. 

7. Proposed in bill introduced in New York legislature providing for munic- 
ipal milk supply in New York City; Ibid., Mar., 1918. 

8. Proposed for Tacoma, Washington; Milk News (Chicago), Nov., 1918, 
p. 14. 

9. Proposed for New York City; Jennings, Irwin J., A Study of New York 
City Milk Problem, National Civic Federation, 1919. 

10. Proposed for Winnipeg, Canada; Hughes, R. D., Report on Municipal 
Milk Supply for the City of Winnipeg, 1919. 

11. Proposed as a last resort for Rochester, New York; North, Chas. E., 
Report of Rochester Milk Survey, 1919. 

* Spargo, John, The Milk Question, p. 176. 

2 Ibid., p. 220. 

'Jennings, Irwin G., A Study of the New York Milk Problem, p. ji. 



CONSIDERATION OF PROPOSED REMEDIES 245 



First Parallel 



Water 



Milk 



1. Municipality uses it. 

2. Universally used by in- 

habitants. 

Constantly used. 

Essential to public health. 

No substitutes. 

Must be clean and pure. 

Will carry infection. 

Quality must be con- 
trolled. 

Main sources outside city. 

Private interests may sell 
under special authoriza- 
tion. 

Business tends towards 
monopoly. 

12. Usually requires power of 

eminent domain. 

1 3 . Makes peculiar use of pub- 

lic streets, necessitating 
special grant. 



9 
10. 



II 



1. Municipality uses it pro- 

portionately less. 

2. Universally used by in- 

habitants. 

3. Constantly used. 

4. Essential to public health. 

5. No substitutes. 

6. Must be clean and pure. 

7. Will carry infection 

8. Quality must be controlled. 

9. Main sources outside city. 

10. Private interests may sell 

without special authori- 
zation. 

11. Business tends toward 

monopoly. 

12. Does not require power of 

eminent domain. % 

13. Does not do so. 



In the same way he compares the milk supply with the 
supply of wood and coal under the heading "Cases held 
not to warrant public ownership." In this instance he 
shows that the milk supply conforms to more of the essen- 
tial requirements for municipalization than does the sup- 
ply of coal or of wood for fuel.^ But municipal coal supply 
has already been attempted and at least one state edu- 
cational institution has sought to direct such activity by 



^ Jennings, Irwin G., A Study of the New York Milk Problem, p. 54. 



246 THE MARKETING OF WHOLE MILK 

sending out a bulletin explaining methods of conducting 
municipal coal yards. ^ 

On the other hand, the view is frequently held that the 
proper handling of many other commodities is as vital to 
the public welfare as is the milk supply. The question Is 
raised: "If municipal milk, why not municipal groceries, 
municipal drugs, etc.?" ^ 

Most proposals have not been very specific as to pro- 
posed methods of acquisition and financing of the milk 
business. Usually it has been proposed to purchase at an 
appraised value the existing businesses. The exact method 
would doubtless depend upon the extent of municipali- 
zation. If all of the milk business is to be taken over, the 
city would have to take over the business of all the present 
dealers. If only a small part of the business is to be under- 
taken, a desirable plant might be purchased or one might 
be built. 

The original financing would undoubtedly have to be 
done by bonding the city. In one instance, however, a 
chamber of commerce has proposed to sell shares to pro- 
ducers and consumers, the voting power to remain in the 
hands of the chamber of commerce.^ It might be feasible 
to finance such an undertaking by issuing bonds for a part 
of the price, then by issuing milk plant certificates for the 
balance of the appraised value, these certificates to be 
similar to preferred stock. The latter method would 
probably be the most convenient for a city which was 
already approaching its debt limit, since such certificates 
would doubtless not be considered a part of the city debt. 

' University of Wis. Mun. Ref. Bui. 4, May, 1918, reported in American 
Ciiy, Vol. XIX, p. II. 

^ Creamery and Milk Plant Monthly, Jan., 1917, p. 17, and Feb., 1917, p. 21. 
* Proposal by Chamber of Commerce of Corning, N. Y. 



CONSIDERATION OF PROPOSED REMEDIES 247 

The exact plan, of course, would have to depend upon 
local conditions and state laws. 

The method of control of such a business would cer- 
tainly be a matter of vital importance. It would seem 
that the main points to be considered are (i) efficiency of 
management; (2) responsibility to the public; (3) elimi- 
nation of politics and corruption. 

One of the plans which would bid fair to comply with 
all the above points is that proposed for the city of Winni- 
peg, Canada. This provides that a commission of three 
members be appointed to act as a city milk commission, one 
member to be elected by the producers, one by the Winnipeg 
Trades and Labor Council, and one by the Greater Winni- 
peg Board of Trade. This commission should be appointed 
for not less than three years. In addition one member of 
the council and one member of the city health depart- 
ment should be ex officio members, and attend all meetings. 

The main duties of this commission were to be, first, to 
appoint a manager of the plant, who should have full 
power and responsibility as to the hiring and discharging 
of employees; and second, to determine the price to be 
paid for milk and the price to be charged.^ 

If the conduct of the municipal plant were left to the 
management of the city council in the average American 
city, a vast amount of inefficiency, politics, and corruption 
would doubtless creep in, since, if the service is satis- 
factory and the rates are fairly reasonable, the consumer 
is often utterly indifferent to what goes on, and, if the 
service is unsatisfactory, he is not very likely to arrive 
at a correct solution of the difficulty.^ 

^ Report on Municipal Milk Supply for the City of Winnipeg, p. lo. 
^ See Problems of City Government, L. S. Rowe, Chap. lo, and Essays in Munic- 
ipal Administration, John A. Fairlie. 



248 THE MARKETING OF WHOLE MILK 

If undertaken at all, municipal milk distribution should 
be undertaken on a self-sustaining basis. Consumers 
cannot know whether the business is efficient or not if 
accounts are mixed up with other accounts, or if accounts 
are not kept in a businesslike way. The Philadelphia 
council, for example, instead of keeping up its gas plant, 
used part of the revenue from this plant for the purpose 
of reducing general city taxes, thus making a false show- 
ing as to real savings. In the meantime the plant was 
deteriorating. 1 One writer has even proposed that such 
municipal utilities as electric light or street railway serv- 
ice should be required to conduct themselves exactly 
as if they were commercial enterprises, selling their serv- 
ices at a fair price, paying taxes at the usual rate, and 
entering into the cost statement all municipal salaries 
properly chargeable to these enterprises. ^ 

Just what would be the relative advantages and dis- 
advantages of the municipal operation of a milk distribut- 
ing system ? As a matter of fact we have no way of know- 
ing, since nothing of the kind has ever been tried. The 
best we can do is to consider evidence of a theoretical 
nature, if it can be called evidence, and to consider what 
has been done in related fields. 

Theoretical gains from centralized operation have al- 
ready been considered in the chapter on distribution. ^ 
An estimate similar to those already given but of a less 
thorough and detailed nature was made in the report on 
the municipal milk supply for the city of Winnipeg.'* 
Taking into consideration existing wages, this report 

^ L. S. Rowe, Problems of City Government, p. 248. 

- Lincoln, E. E., Results of Municipal Electric Lighting in Massachusetts. 

« Chapter IV. 

* Report on Municipal Milk Supply for the City of Winnipeg. 



CONSIDERATION OF PROPOSED REMEDIES 249 

estimates that an annual saving could be effected by a 
municipally owned milk monopoly as compared with the 
existing competitive system of about ^230,348. These 
savings were to be made on the following items and in 
the indicated amounts: 

Management $10,000 

Office staff. 4, 160 

Plant staff. 29,952 

Stable staff 6,440 

Drivers 143,000 

Horses 32,120 

Wagons 3)500 

Sleighs 1,176 

Total annual savings $230,348 

This saving on 56,000 quarts, the daily consumption at the 
time this report was made, would amount to 1.12 cents per 
quart. 

A similar estimate was prepared by Mayor Carlson for 
the city of Jamestown, New York.^ In all these estimates 
big potential gains are shown on paper. Could these be 
realized? The theoretical gains of 2 cents per quart in 
Rochester, of 1.5 cents in Kansas City, and 1.2 cents in 
Winnipeg could be dissipated very readily by inefficient 
management. 

On the other hand, with the development of a higher 
standard of citizenship, it should be possible to overcome 
these difficulties. In fact, if we are to judge by the num- 

^ American City, Vol. X, p. 50, Jan., 1914. The City of Jamestown, New 
York, has recently acted upon the above suggestion and has voted to issue 
$i5o,ooo.cx) of bonds to finance a city milk plant. See Hoards Dairyman, 
Sept. 10, 1920, p. 290. 



2SO THE MARKETING OF WHOLE MILK 

ber of successful municipal enterprises in this country at 
present, we must come to the conclusion that there are 
possibilities along this line. In 191 8 it was reported that 
2S'S P^^ ^^^^ °^ ^^^ ^^^ lighting systems in the United 
States were municipally owned. ^ In another publication 
an "eminent authority" is reported as saying that in one 
hundred fifty American cities electric light rates under 
private ownership ranged from ten cents up and under 
public ownership from ten cents down. 2 One difficulty 
with many such comparisons is that the reader never 
knows whether the rates reported for the municipally 
operated enterprise were actually sufficient to maintain 
the plants intact and cover all proper expenses, or whether 
some of the supervision, for example, was not charged up 
to the plant. 

Thus far all our considerations have been based on 
economic gains or losses. One argument for munic- 
ipal ownership of milk plants is based on the theory that 
it should be undertaken for the benefit of the public 
health. One writer, for example, expresses the firm belief 
that municipalizing the milk supply "will be found to be 
the effective way, not only to check, but to wipe out milk- 
borne disease." ^ 

Advantages to the producer, if indeed there were such 
advantages, would materialize only in case the system 
proved to operate smoothly and efficiently. The city 
consumer, through the efficient manager in charge of the 
plant, would doubtless drive as hard a bargain as would 
any private dealer seeking profit, and might be even more 
arbitrary, because he would have much more of monopoly 

^ American City, Vol. XIX, p. 419. Article gives numbers by states. 
2 Pacific Municipalities, Vol. XXXIII, Dec, 1919, p. 465. 
^ Straus, Lina G., Disease in Milk, p. 347. 



CONSIDERATION OF PROPOSED REMEDIES 251 

power. Hence farmers would actually have their market- 
ing alternatives reduced. Instead of having a choice of 
different dealers in the same city as well as different cities, 
and different use-demands, they would have only the last 
two choices. 

The consumer on his part would have to forego the 
satisfaction at present enjoyed of selecting from among 
several dealers according to the dictates of personal prefer- 
ence. At present many consumers have very decided 
preferences, based on such grounds as variation in quality 
of milk, differences in time of delivery, or even personal 
like or dislike of the dealer himself. 

Does the plan seem feasible and desirable? The answer 
would seem to depend very largely upon local conditions. 
With an alert citizenship who would put in power a 
responsible man or set of men of ability who would be 
held to account, such a plan should work. In most Amer- 
ican cities, however, it is doubtful whether the plan would 
be found satisfactory. Most of its advocates have, as 
one writer puts it, tended to "minimize practical dangers 
in organization and operation." ^ A big disadvantage 
might be found in the fact that much of the skill developed 
in the milk business by long years of experience would be 
lost by replacing experienced men with inexperienced 
politicians. On the whole it is a question whether the form 
of government in most of our cities is readily adaptable 
to taking over so complicated a business as that of supply- 
ing milk. 

Section j. Publicly Regulated Private Monopoly 

Another remedy which has perhaps even more fre- 
quently been proposed than has municipal ownership is 

1 MacNutt, J. S., Modern Milk Problem, p. 140. 



252 THE MARKETING OF WHOLE MILK 

that of a legalized monopoly under public regulation. 
Argument in favor of this plan is based largely upon the 
same grounds as is that for municipal ownership, the main 
difference of opinion being on the point of the relative 
efficiency of private as compared to public enterprises 
and on the proper scope for governmental activity. 

The report of Dr. Charles E. North on his survey of the 
milk supply of the city of Rochester recommends that 
legislation be secured enabling Rochester or any city in 
New York either to purchase or to control the milk busi- 
ness within its boundaries, and that the city authorities 
be given access to all books and records. The report 
recommends particularly "that the city authorities en- 
courage the centralization of the business of milk distri- 
bution under the auspices of the present industry with 
the object of avoiding, if possible, the establishment of 
municipal ownership through the securing of efficient serv- 
ice under private ownership." ^ 

An elaborate plan was proposed by Mr. P. D. Fox, vice- 
president of the Borden Farm Products Company, provid- 
ing for a regulated milk monopoly. ^ The gist of this pro- 
posal is so concise that it can best be quoted: 

"Pass a special enabling act that would be confined by its 
terms to the business of fresh milk distribution in the so-called 
metropolitan district. Let the advantages of operating under 
the act be sufficiently real so that it would induce most, if not 
all, of the distributors to avail themselves of its benefit. (It is 
assumed that no law which attempted to compel a distributor 
to turn over his business to a new corporation would be con- 
stitutional.) Let the act contemplate the formation of a corpo- 
ration with a capital stock divided into preferred and common 

1 North, Dr. Chas. E., Milk Survey of the City of Rochester, pp. 220-221. 

2 Dairymen's League News, Jan. 10, 1920, p. i. 



CONSIDERATION OF PROPOSED REMEDIES 253 

shares, the preferred stock to be issued dollar for dollar to the 
extent of the value (appraised as mentioned below) for the net 
quick or current assets, cash, accounts receivable, etc., of the 
distributors availing themselves of the plan and the common 
stock to be issued dollar for dollar to the extent of the net value 
(appraised as before) of the fixed assets (land, buildings, plant, 
equipment, etc.). Let no stock be issued for good will. The 
plan thus far contemplates an obviously sound capitalization. 
Confine the operations of the new company to the business of 
dealing in milk, cream, butter, cheese, and, if desired, other 
food products, but exclude condensed milk, evaporated milk 
and other manufactured milk products so as to conserve the 
milk supply adjacent to New York City for the fresh milk 
requirements of the city's population and thus discourage, as 
far as practicable, milk manufacturing in this adjacent territory, 
except as it may be needed to preserve from loss the seasonal 
surplus milk. Let the corporation be managed by a board of 
directors in which the dairymen and the public will have repre- 
sentation, such representatives to be chosen in a manner that 
will inspire public confidence. Let there be a board of ap- 
praisers appointed, for example, by the Chief Judge of the 
Court of Appeals and chosen from men of established reputation 
as appraisers or certified public accountants doing business in 
the State. 

"Let this board determine the value of the assets to be ac- 
quired by the new corporation. Permit any distributor to 
apply within a limited time after the passage of the act for 
admission to the corporation, submitting his inventory of 
assets for appraisal and when appraised at their fair market 
value as a going concern, let the stock to which the distributor is 
entitled be issued, unless he elects to reject the same and remain 
out of the corporation. Require the directors of the new com- 
pany to dispose of plants or other assets when in their judgment 
they are no longer required for the proper and economical 
operation of the business, thus eliminating unnecessary duplica- 
tions, and let the proceeds of such sales be used for the retire- 



254 THE MARKETING OF WHOLE MILK 

ment of the preferred stock at par unless needed as working 
capital in the business. Let the new company enjoy, if it can 
earn it, an average annual net income from its milk business and 
available for dividends of one-half a cent a quart of milk pur- 
chased and handled by it. Provide that if the net income in 
any one year exceeds that limit by an amount more than suffi- 
cient to make up the average permitted net income from pre- 
ceding years, the disposition of the excess shall be determined 
by a board of arbitration, which, like the board of appraisal, 
shall consist of three members and be appointed by (for exam- 
ple) the Chief Judge of the Court of Appeals and chosen from 
among the leading business men of the state. In this way re- 
move the incentive to try to make greater profits than the limit 
fixed by the law. During the war both the government and 
business had considerable experience in price fixing, and as a 
result thereof it is generally conceded that the limitation of 
profits works better than arbitrary price fixing. While the 
former does, of course, have a deterrent effect in attracting new 
capital for needed improvements and extensions, still it does not 
run counter to the economic law of supply and demand, whereas 
the latter is open to both the objections above noted, and fur- 
thermore is objectionable because it is impossible to conduct 
business on the basis of a controlled selling price and of uncon- 
trolled costs. Require the corporation to file a financial report 
each year with the state comptroller showing its financial con- 
dition and the amount of net income realized and to permit an 
inspection of its books, records, and accounts." 

The plan was to become operative "when two or more 
of the distributors doing in the aggregate a very substantial 
part of the fresh milk business in the metropolitan dis- 
trict joined the new corporation." 

The salient points in his plan were thus outlined: 
"Sound capitalization, limited profits, full publicity, 
participation of producers and consumers in the board of 



CONSIDERATION OF PROPOSED REMEDIES 255 

directors, immediate savings in distributing costs through 
the elimination of some of the duplicated investments and 
service, and further savings of the same kind through the 
gradual elimination of unnecessary points of operation, 
the institution of trade reforms, such as (to choose but 
one example) requiring a deposit on bottles, thus insuring 
the cooperation of the consumer in this respect, increasing 
the distributing capacity of the wagons and thus reducing 
the delivery cost per unit, increasing the volume of milk 
handled at the country depots and pasteurizing plants, 
thus reducing the per unit country costs, conserving in the 
industry individual initiative, (and conserving) the skill 
of men long experienced in the conduct of a specialized 
business which in a large measure might be lost under 
other plans which have been suggested {i. e.y municipal 
ownership and operation)." 

Such a plan has actually been tried in Calgary, Canada, 
where the business of the large companies was, at the 
suggestion of the food controller, so revised as to give 90 
per cent of the fluid milk business to one company. The 
other leading companies confined themselves to ice cream 
and butter manufacturing respectively. The plan is said 
to be working well from the point of economy of distri- 
bution and to have reduced the number of delivery wagons 
from fifty to thirty-one.^ 

This plan could hardly do away with all the evils of com- 
petition at once unless some way could be found whereby 
the city could limit the number in the business, practi- 
cally compelling all dealers to join the one company. 
This last point would doubtless meet constitutional ob- 
jections in any of the states. The particular advantages 
claimed for such a scheme as compared with municipal 

^ Hoard's Dairyman, Oct. 17, 1919, p. SSi. 



2s6 THE MARKETING OF WHOLE MILK 

ownership are that greater efficiency in operation could be 
secured than would be possible if the city operated the 
business itself. In common with municipal operation its 
big advantages would be all the economies of large-scale 
operation together with the elimination of duplication 
and also the betterment of quality resulting from the use 
of more up-to-date equipment and greater facility in regu- 
lating by the health authorities. 

Many consumers, however, and producers as well, har- 
bor a great fear of any large corporation and would be 
very credulous of any agitator's wild or malicious charges. 
A fatal weakness of such a scheme is quite likely to be that 
the public would almost certainly be unwilling to allow 
adequate revenue. Note, for example, the attitude of 
our various governing bodies toward the railroads and 
other public utilities under regulation. In perhaps a 
majority of instances revenues are inadequate to attract 
capital sufficient to keep these utilities abreast of public 
needs. In the opinion of the writer, regulation of a milk 
utility would have to be by a State Commission somewhat 
similar to our public utilities commissions, since any city 
commission would very likely be too easily drawn into 
politics over minor issues. The recent experience of 
Columbus, Ohio, in refusing to grant its street railway 
company an adequate return, and of Toledo, Ohio, along 
the same line, add weight to the conclusion that a pub- 
licly regulated corporation would get fairer treatment 
from state than from city authorities. The failure of the 
public generally to understand the source and nature of 
profits is likely to forestall the introduction of more effi- 
cient methods, because the corporation could hope to gain 
but little from any superior efficiency its management 
might develop. 



CONSIDERATION OF PROPOSED REMEDIES 257 

The producer would doubtless feel that a city corpo- 
ration, seeking to incur the favor of its city patrons, whose 
votes granted it a charter and whose representatives 
regulate its rates, would be a hard bargainer. He would 
not be inclined to trust the price-making function to a 
city regulatory board, even if producers, consumers, and 
dealers were represented. 

It has been reported that in Calgary, Canada, much dis- 
satisfaction arose among consumers as a result of con- 
centration of the business in the hands of one company. 
A large concern with a monopoly of the business would 
certainly inaugurate numerous money-saving reforms 
which would not meet with the entire approval of its cus- 
tomers, such for example as the deposit on bottles above 
mentioned, curtailment of special delivery service, de- 
livery at times convenient to the company, etc., and this 
would certainly result in a great deal of criticism, at least 
in the start. In the above instance it was reported ^ that 
this dissatisfaction went so far as to result in a movement 
to supply consumers with goats with which to produce 
their own milk. 

Section 4. Cooperation as a Remedy 

Four types of cooperation have been proposed: (i) co- 
operation among dealers, particularly in the delivery of 
milk; (2) cooperation between grocers and producers; 
(3) cooperation among consumers; (4) cooperation among 
producers. 

Cooperation among dealers would seem to be a make- 
shift at best and would not really solve the problem un- 
less it went far enough to be similar to the plan discussed 
in the preceding section. For one delivery wagon to 

^ International Milk Dealers' Association, Nov., 1917. 



258 THE MARKETING OF WHOLE MILK 

carry the milk of various dealers so as to eliminate dupli- 
cation in delivery would be an almost impossible and cer- 
tainly a wasteful undertaking, since the dealer assigned 
to deliver the milk in a particular zone would be required 
to carry in all sizes of containers milk of all the different 
dealers having customers in that zone, carrying each in 
quantity sufficient to meet the fluctuating demands of such 
consumers. 

A plan now being tried in Cleveland, Ohio, provides 
for cooperation between producers and grocers, the stock 
in the bottling plant being owned largely by producers 
and grocers. The aim in this instance is for the cooper- 
atively owned plant to process the milk which is to be 
sold to the grocery trade, the members of the grocery 
trade sharing in any reduced costs which may result. 
The grocers get the milk which they require from the cen- 
tral plant with their own delivery wagons and deliver the 
milk to the consumers along with their regular grocery 
deliveries. 

Cooperation among consumers is not likely to prove 
feasible. The consumer has but little interest in milk 
after all. It is but one of his many interests, and he would 
hardly devote enough attention to the plan to make con- 
sumers' cooperation efficient. There is, however, a suc- 
cessful small consumers' milk company at Ashtabula Har- 
bor, Ohio, which has been in operation for a number of 
years. This particular plant has, as a rule, sold milk a 
cent or two under many of the other plants. The stock 
is owned almost entirely by Finnish laborers and business 
men, a class of people who have been used to cooperating 
in their mother country. Practically the same group of 
people have been successfully operating a cooperative 
store and a cooperative bakery. 



CONSIDERATION OF PROPOSED REMEDIES 259 

Cooperation among producers is a more feasible plan 
and one from which better results may be expected than 
from any of the three already discussed. In fact, as pre- 
viously shown 1 there is already a considerable nucleus 
of producers' cooperation in the distribution of milk, 
particularly in a number of cities of moderate size. This 
development bids fair to continue and is much more 
likely to bring good results than cooperation among con- 
sumers, since dairymen are as a rule interested mainly 
in milk production and sale. Furthermore, our city milk 
zones, aside from the large metropolitan areas, are small 
enough to permit the producers to keep posted as to what 
is going on and thus keep in touch with the management 
of the concern. It is an open question, however, whether 
producers about most of our large cities could operate 
efficiently so large and complicated a business as the city 
milk business. Successful operation of such a business 
in one of our large cities requires the closest attention of 
able men wljio are vitally interested. 

Section 5. The Milk Commission and Milk Arbitrator Plans 

Another remedy that has frequently been suggested 
is that of a milk commission. During the war period 
particularly there were many attempts to fix prices and 
otherwise regulate the milk business. In the fall and 
winter of 1 917-18 federal milk commissions were appointed 
in the New England District, the New York City Dis- 
trict, the Chicago District, the San Francisco District, 
and for the State of Ohio.^ In addition many local com- 
missions were appointed, such for example as those of 
Detroit, Michigan, and Evansville, Indiana. 

iChap. V, Sec. 5. 

2 Bureau of War Industries Bui. 5, p. 107. 



26o THE MARKETING OF WHOLE MILK 

The aim was to have these commissions composed of 
capable men, who would represent the various interests 
and who could arrive at prices fair to producers as well as 
to consumers. Members of these commissions were, for the 
most part, persons who were neither producers of nor 
dealers in milk. In many instances it took these com- 
missions a long time to become familiar with their prob- 
lems, and many could hardly be said to have gone to the 
root of these problems before they ceased to exist. 

In most cases these commissions sought to arrive at 
fair prices by securing cost of production figures so far as 
available and cost of distribution figures as shown by 
their own accountants. In some cases special cost of pro- 
duction investigations were conducted. As a whole these 
price tribunals had a difficult task. The Chicago Milk 
Commission broke up in disagreement over its first report, 
one member resigning and two issuing minority reports. 
The New York Commission had great difficulty in bring- 
ing any semblance of peace between dealers and producers. 
The Ohio Commission practically passed out of existence 
in December, 191 8, when the Ohio dairymen refused to 
abide by its decision and appealed to Food Administrator 
Croxton for an increase in the price over that allowed by 
the Commission, which increase was granted. The New 
England Commission was the only federal commission to 
function as long as the Food Administration was in con- 
trol. 

One of the most successful commissions was the Detroit 
Commission. Its success has doubtless been due in large 
measure to the fact that it accepted as its task the provid- 
ing of an adequate supply of milk for the city of Detroit. 
Its work was facilitated by the fact that both producers 
and dealers had organizations through which collective 



CONSIDERATION OF PROPOSED REMEDIES 261 

bargaining could be carried on, so that it was relatively- 
easy for the Commission to get the two groups together. ^ 
The personnel of the commission perhaps had something 
to do with the success in administering its duties. 

As an ultimate solution for the milk marketing problem 
the plan can hardly be expected to measure up to require- 
ments unless the commissions be composed of broad- 
minded men of considerable ability, with a knowledge 
of dairy farming and fundamental farm economics and 
able to give a good share of their time to the problem. 
First-hand knowledge of the operation of one of these com- 
missions and a study of the reports of others have con- 
vinced the writer that a large factor in the failure of the 
commissions above mentioned to measure up to their 
opportunities lay in the fact that the men not only failed 
to grasp the whole situation but that they were too much 
engrossed with their own everyday affairs to give the prob- 
lem the attention necessary to master the details suffi- 
ciently to make intelligent decisions. Such commissions 
would perhaps function more satisfactorily if they were 
to act merely as arbitration boards rather than as price- 
fixing bodies. 

The Wicks Committee in New York recommended that 
the milk business be declared a public utility and be 
placed under the control of a competent state depart- 
ment.2 

Closely related to the commission plan is that of ap- 
pointing a milk price arbitrator. This plan was in oper- 
ation in Pennsylvania during the war and proved so satis- 
factory that it has been continued since the close of the 
war. The arbitrator "sits in" with representatives of 

1 See Special Bulletin 99, Mich. Agr. College, 1919. 

^ Prelim. Report of Joint Com. on Dairy Pro., Livestock 13 Poultry, p. 578. 



262 THE MARKETING OF WHOLE MILK 

the dealers and producers and aids them in coming to an 
agreement. At the same time his presence gives the 
public a feeling of confidence in the data presented by 
either side in substantiation of its claim, and counteracts 
any feeling on the part of the public that it is being im- 
posed upon whenever prices are increased.^ 

Section 6. The Store or Milk Station as a Solution 

The place of the store in our milk distributing system 
has already been quite fully discussed. ^ Little can be 
added here except to call attention to the proposal in 
connection with the other remedies suggested. The store 
or milk station fills a place, but, as above shown, to at- 
tempt to make it perform a function for which it is not 
at present adapted would increase rather than lessen the 
evil of duplication in delivery and would therefore not 
decrease the expense of getting the milk to the consumer. 
Aside from the doubtful point of greater economy, the 
store or milk station method, if adopted generally, would 
lead to more irregular consumption of milk — a change 
which our dietitians would thoroughly deplore. 

Section /. Zoning of City to Eliminate Duplication 

Another proposal is to zone our cities and allot each 
of the various dealers to particular zones, so as to eliminate 
duplication. So far as elimination of duplication of de- 
livery service is concerned, this plan would solve the prob- 
lem, but the public would be far from satisfied to be con- 

^ In the spring of 1920 the Franklin County, Ohio, grand jury, after going 
into the local milk problem from every angle, recommended that a milk price 
arbitrator be appointed in the Columbus District. 

2 Chap. IV, Sec. 7. 



CONSIDERATION OF PROPOSED REMEDIES 263 

fined by public or private decree to a single dealer. So 
long as there are numerous dealers in the business the 
individuals constituting the public will have preferences 
and so long will they seek to satisfy those preferences by 
selecting the dealers of their choice. Doctors and mothers 
with young children particularly often have strong pref- 
erences for the milk of certain dealers. This last point 
comes to be of importance in connection with the fact 
that people are constantly moving from one part of a city 
to another. The zoning scheme strictly adhered to would 
mean that consumers would have to change milk men 
every time they moved into a different section of the city- 
Legal difficulties would undoubtedly arise if a city 
sought to compel zoning by restricting given dealers to 
particular zones, whereas practical difficulties would 
arise out of the fact that the trade in certain sections of 
every city is much more desirable than that in other sec- 
tions. 

Frequent reference is made in dairy papers and in our 
dailies to the alleged fact that zoning has wrought wonders 
in Philadelphia. In a letter to the writer, Dr. Clyde L. 
King states that technically the city has not been zoned, 
but that at his suggestion the dealers are voluntarily work- 
ing towards that end and at the same time are trying to 
increase the average size of the loads. ^ He has further 
stated that a saving of perhaps half a cent a quart would 
be possible if complete zoning were brought about.^ 

It would seem then, that zoning might offer some sav- 
ing, but that, on the other hand, it would have some seri- 
ous disadvantages, and after all it is but a halfway meas- 
ure and could not, even though it did all that had been 

^ Letter Feb. 15, 1919. 

' The Milk Price Situation in Philadelphia, 1920, p. 18. 



264 THE MARKETING OF WHOLE MILK 

claimed for it, go to the root of the real difficulties in the 
milk business. 

Section 8. Collective Bargaining as a Remedy 

In many senses collective bargaining can hardly be 
looked upon as a remedy for many of the problems of milk 
marketing. On the other hand, with producers properly 
organized and with producers and dealers once arrived 
at a recognition of the fact that the whole problem must 
be approached in a spirit of fairness and broad-mindedness, 
many of the present difficulties should be overcome. 
Monthly price contracts, bases of payment, fat tests, can 
and hauling charges, the surplus, health regulations, — 
all are problems which can be approached much better 
if producers and dealers act as units rather than as in- 
dividuals. Producers themselves have a vital interest 
at stake in seeing that city prices are not too high, and 
consumers would ordinarily have little to fear from col- 
lusion between producers and dealers. Where such trouble 
is feared, a price arbitrator or milk commission could 
readily be introduced to satisfy the public that everything 
is open and above board. 

Not only does collective bargaining appear to be a 
practical solution for certain phases of the milk problem, 
but it may be the one adopted of necessity at first, since 
very few cities will within the next few years be likely 
to adopt such remedies as milk monopoly or municipal 
ownership. Even if any of our cities adopt the policy 
favoring monopoly, greater centralization, or municipaliza- 
tion of the milk supply, collective bargaining will quite 
certainly develop, since individual producers would 
be sure to feel aggrieved at various times if compelled 
to deal with a milk monopoly, whether privately or 



CONSIDERATION OF PROPOSED REMEDIES 265 

publicly owned. Producers would thus feel the desir- 
ability, if not the necessity, of being represented by their 
most capable bargainers. 

Much of the discussion in this chapter is based on the 
assumption that our present system of distribution is 
extremely wasteful and inefficient and that the plans 
above discussed and others would remedy existing evils. 
In the minds of some authorities, however, the evidence 
thus far presented is not conclusive and in their opinion 
much may be said on the other side. 



CHAPTER VIII 

CONCLUSION 

The milk business is a business in which the public has 
a particularly vital interest at stake. Public regulation 
of all phases of the business is justified, but greater care 
should be exercised than has been used in the past in im- 
posing regulations upon the business in order not to un- 
necessarily hamper the production or distribution of the 
product. Producers themselves are beginning to see that 
proper regulation is not only the rightful privilege of the 
consumer but may actually benefit the producer as well. 

It would seem to be desirable to encourage a greater 
degree of concentration in the city milk business, so as 
to secure any advantages of large-scale operation, reduce 
duplication to a minimum, make possible the use of the 
most sanitary methods of handling milk, and facilitate 
public regulation as to sanitary conditions and quality. 

The wastefulness of the competitive system in the milk 
business is undoubtedly very great, but probably no 
greater than in many other lines of endeavor. Cost of re- 
tail distribution could undoubtedly be reduced one or two 
cents per quart if the business could be centralized, pro- 
vided it were conducted as efficiently as are the more 
efficient privately operated concerns to-day. 

Municipal ownership and operation, regulated private 
monopoly, cooperation by producers or consumers, zoning, 
the milk commission or milk arbitrator plans,; — all offer 

266 



CONCLUSION 267 

but partial remedies. All have disadvantages and all 
would depend for their successful operation upon a saner, 
more businesslike, and less selfish sort of action than is 
usually displayed by those in charge of our city govern- 
ments or of the various organized interests. 

The most feasible remedy for the present appears to 
be a combination of collective bargaining and the milk 
commission or milk arbitrator plan. The main difficulty 
would appear to be that of getting men appointed who 
would be able to hold the confidence of all three parties — 
producers, dealers, and consumers. Such commissions, 
if that plan were adopted, should perhaps be state com- 
missions, similar, in some respects, to the commissions 
which control our public utilities. Such bodies should 
be non-political, and the members should be appointed 
for rather long terms, expiring at different times. 

The surplus problem has been a perplexing one. No 
easy solution appears to be available. For some plants 
there is no real surplus. They can use all the milk they 
can buy^ — but only if they can buy it at lower prices, for 
a part of it must go into uses which are largely supplied 
by cheaper milk, produced in the summer months on 
cheaper land, and with somewhat less labor and equipment 
than is usually required for city milk production. One 
solution which appears to be feasible is that of determining 
the amount of the surplus and then basing payment for 
it upon the market prices of certain manufactured prod- 
ucts, usually butter or cheese, with an allowance for 
skim milk. Another method of solving the problem, more 
particularly where dealers are not already handling it 
economically, is for the producers to convert the surplus 
into the various dairy products in plants owned and oper- 
ated by themselves. 



268 THE MARKETING OF WHOLE MILK 

Price determination has been the center of much con- 
tention in the past and will doubtless continue to be trou- 
blesome. No easy solution has been found. Cost of pro- 
duction formulae, basic market quotation arrangements 
of various kinds, all appear to be useful only as starting 
points in arriving at price at a given time. With the 
right kind of collective bargaining, with the recognition 
of the limits of cost of production figures as factors in 
price determination, and with a clearer understanding 
of the conditions of supply and demand, which after all 
determine price at any given time, the problem should 
be less troublesome in the future than in the past. 

Collective bargaining among producers is here to stay. 
In general it will be beneficial to both producer and con- 
sumer, particularly if it succeeds in reducing marketing 
costs in any way. Producers are often inclined to ex- 
pect too much from their organizations along the lines 
of securing price increases, and consumers, to about the 
same extent, fear these organizations and look upon them 
as "milk trusts." Some sort of protection should prob- 
ably be provided to protect consumers against attempts 
at monopolistic practices. So long, however, as farmers in 
and about the milk sheds of our cities are free to enter or 
leave the field of milk production with relative ease, as at 
present, and so long as a large proportion of our milk goes 
into the manufacture of the various dairy products, no 
producers' organization can hope unduly to affect prices of 
milk for long. Consumers need therefore have little fear 
of a "farmers' milk trust," for such a thing is practically 
impossible. 

The milk marketing problem cannot be solved so long 
as the triangular warfare between producers, dealers, and 
consumers continues. What is needed is a better under- 



CONCLUSION 269 

standing all around, a greater spirit of frankness, a recog- 
nition by each that the others have rights that are to be 
respected; that each group is composed of human beings 
actuated by the same human impulses; and that all can 
gain by co5peration and mutual understanding. 



APPENDIX A 

REGULATION 1 3 FROM NEW YORK SANITARY CODE 

Regulation 13. Designations of Milk and Cream Restricted 

All milk sold and offered for sale at retail, except milk sold 
or offered for sale as sour milk under its various designations, 
shall bear one of the designations provided in this regulation, 
which constitute the minimum requirements permitted in this 
state. 

No term shall be used to designate the grade or quality of 
milk or cream which is sold or offered for sale, except: 

"Certified" 

"Grade A raw" 

"Grade A pasteurized'* 

"Grade B raw" 

"Grade B pasteurized" 

"Grade C raw" 

"Grade C pasteurized" * 

Certified: No milk or cream shall be sold or offered for sale as 
"certified" unless it conforms to the following requirements: 

The dealer selling or delivering such milk or cream must hold a 
permit from the local health officer. 

All cows producing such milk or cream must have been tested 
at least once during the previous year with tuberculin, and any 
tow reacting thereto must have been promptly excluded from 
the herd. The reports of such tuberculin tests must be filed with 
the local health officer and the milk commission of the county 
medical society in the municipality and coiinty respectively in 
which such milk is delivered to the consumer. 

Such milk must not at any time previous to delivery to the 
consumer contain more than 10,000 bacteria per cubic centi- 

271 



272 APPENDIX A 

meter and such cream not more than 50,000 bacteria per cubic 
centimeter. 

Such milk and cream must be produced on farms which are 
duly scored on the scorecard prescribed by the state commis- 
sioner of health, not less than thirty-five per cent for equipment 
and not less than fifty-five per cent for methods. 

Such milk and cream must be delivered within thirty-six 
hours of the time of milking. 

Such milk and cream must be delivered to consumers only in 
containers filled at the dairy or central bottling plant. 

The caps must contain the word "Certified" and bear the 
certification of a milk commission appointed by the county 
medical society organized under and chartered by the medical 
society of the state of New York, and must also contain the 
name and address of the dairy as well as the date of milking. 

Every employee before entering upon the performance of his 
duties shall be examined by a duly licensed physician and the 
reports of such examination shall be sent to the milk commission 
certifying the milk from such dairy. 

The milkers and all persons handling the milk must be pro- 
vided with suits and caps of washable material which shall be 
worn while milking or handling the milk and shall not be worn 
at other times. When not in use these garments must be kept 
in a clean place free from dust. Not less than two clean suits 
and caps must be furnished weekly. The hands of the milkers 
must be washed with soap and hot water, and well dried with a 
clean towel, before milking. 

Grade A raw. No milk or cream shall be sold or offered for 
sale as "Grade A raw" unless it conforms to the following re- 
quirements: 

The dealer selling or delivering such milk or cream must hold a 
permit from the local health officer. 

All cows producing such milk or cream must have been tested 
at least once during the previous year with tuberculin, and any 
cow reacting thereto must have been promptly excluded from 
the herd. 



APPENDIX A 273 

Such milk must not at any time previous to delivery to the 
consumer contain more than 60,000 bacteria per cubic centi- 
meter, and such cream not more than 300,000 bacteria per cubic 
centimeter. 

Such milk and cream must be produced on farms which are 
duly scored on the scorecard prescribed by the state commis- 
sioner of health not less than twenty-five per cent for equipment, 
and not less than fifty per cent for methods. 

Such milk and cream must be delivered within thirty-six 
hours from the time of milking, unless a shorter time shall be 
prescribed by the local health authorities. 

Such milk and cream must be delivered to consumers only 
in containers sealed at the dairy or a bottling plant. The caps 
or tags must be white and contain the term "Grade A raw" in 
large black type, and the name and address of the dealer. 

Grade A pasteurized. No milk or cream shall be sold or offered 
for sale as "Grade A pasteurized" unless it conforms to the 
following requirements: 

The dealer selling or delivering such milk or cream must hold 
a permit from the local health officer. 

All cows producing such milk or cream must be healthy as 
disclosed by an annual physical examination. 

Such milk or cream before pasteurization must not contain 
more than 200,000 bacteria per cubic centimeter. 

Such milk must not at any time after pasteurization and 
previous to delivery to the consumer contain more than 30,000 
bacteria per cubic centimeter, and such cream not more than 
150,000 bacteria per cubic centimeter. 

Such milk and cream must be produced on farms which are 
duly scored on the scorecard prescribed by the state commis- 
sioner of health not less than twenty-five per cent for equipment 
and not less than forty-three per cent for methods. 

Such milk and cream must be delivered within thirty-six 
hours after pasteurization, unless a shorter time shall be pre- 
scribed by the local health authorities. 

Such milk and cream must be delivered to consumers only 



274 APPENDIX A 

in containers sealed at the dairy or at a bottling plant. The 
caps or tags must be white and contain the term "Grade A 
pasteurized" in large black type. 

Grade B raw. No milk or cream shall be sold or offered for 
sale as "Grade B raw" unless it conforms to the following re- 
quirements: 

The dealer selling or delivering such milk or cream must hold 
a permit from the local health officer. 

All cows producing such milk or cream must be healthy as 
disclosed by an annual physical examination. 

Such milk must not at any time previous to delivery to the 
consumer contain more than 200,000 bacteria per cubic centi- 
meter, and such cream not more than 750,000 bacteria per 
cubic centimeter. 

Such milk and cream must be produced on farms which are 
duly scored on the scorecard prescribed by the state com- 
missioner of health not less than twenty-three per cent 
for equipment and not less than thirty-seven per cent for 
methods. 

Such milk and cream must be delivered within thirty-six 
hours from the time of milking, unless a shorter time shall be 
prescribed by the local health authorities. 

The caps or tags on the containers must be white and contain 
the term "Grade B raw" in large, bright green type, and the 
name of the dealer. 

Grade B pasteurized. No milk or cream shall be sold or 
offered for sale as "Grade B pasteurized" unless it conforms to 
the following requirements: 

The dealer selling or delivering such milk or cream must hold 
a permit from the local health officer. 

All cows producing such milk or cream must be healthy as 
disclosed by an annual physical examination. 

Such milk or cream before pasteurization must not contain 
more than 1,500,000 bacteria per cubic centimeter. 

Such milk must not at any time after pasteurization and 
previous to delivery to the consumer contain more than 100,000 



APPENDIX A 275 

bacteria per cubic centimeter, and such cream not more than 
500,000 bacteria per cubic centimeter. 

Such milk and cream must be produced on farms which are 
duly scored on the scorecard prescribed by the state commis- 
sioner of health not less than twenty per cent for equipment and 
not less than thirty-five per cent for methods. 

Such milk must be delivered within thirty-six hours, and such 
cream within forty-eight hours after pasteurization, unless a 
shorter time is prescribed by the local health authorities. 

The caps or tags on the containers must be white and contain 
the term "Grade B pasteurized" in large, bright green type, 
and the name of the dealer. 

The provisions of this subdivision shall take effect through- 
out the state of New York, except in the city of New York, on 
the first day of January, 1916. 

Grade C raw. No milk or cream shall be sold or oflFered for 
sale as "Grade C raw" unless it conforms to the following re- 
quirements: 

The dealer selling or delivering such milk or cream must hold a 
permit from the local health officer. 

Such milk and cream must be produced on farms which are 
duly scored on the scorecard prescribed by the state commis- 
sioner of health not less than forty per cent. 

Such milk and cream must be delivered within forty-eight 
hours from the time of milking, unless a shorter time shall be 
prescribed by the local health authorities. 

The caps or tags affixed to the containers must be white and 
contain the term "Grade C raw" in large red type. 

Grade C pasteurized. No milk or cream shall be sold or 
offered for sale as "Grade C pasteurized" unless it conforms to 
the following requirements: 

The dealer selling or delivering such milk or cream must 
hold a permit from the local health officer. 

Such milk and cream must be produced on farms which are 
duly scored on the scorecard prescribed by the state commis- 
sioner of health not less than forty per cent. 



276 APPENDIX A 

Such milk and cream must be delivered within forty-eight 
hours after pasteurization, unless a shorter time shall be pre- 
scribed by the local health authorities. 

The caps or tags affixed to the containers must be white and 
contain the term "Grade C pasteurized" in large red type. 

The bacterial count herein required shall be made only at 
county or municipal laboratories or such other laboratories as 
may be approved by the state commissioner of health. 

In those municipalities where a bacterial count of the milk is, 
in the opinion of the local health authorities, impracticable, 
they may in their discretion grade milk and cream according to 
the scroe of the dairies producing it, as prescribed in this regula- 
tion, but no such milk shall be designated "certified," "Grade A 
raw," or "Grade A pasteurized." 

This regulation shall not be construed to rescind or modify 
any existing local regulation or ordinance controlling the grad- 
ing of milk or cream established prior to the first day of Septem- 
ber, 191 4. 

This regulation as amended shall take effect March 15, 191 8. 



APPENDIX B 

SOME PROBLEMS ARISING OUT OF THE MARKETING OF MILK ON A 
BUTTERFAT BASIS 

The Butterfat Content as a Basis for the Sale of Whole Milk 

Since 1892, when the Babcock tester was Invented, the 
butter-fat content of milk has gradually come to be recognized 
as the most important single factor to be considered in establish- 
ing the grade of milk. While butterfat content is not the only 
index of value, it is an index which cannot, in fairness, be neg- 
lected. There are at least three distinct reasons why milk should 
be bought on the basis of butterfat content: 

1. The food value — in heat or energy units — differs widely 
in milks of different fat contents, and varies directly, though not 
in the same proportion, as the fat content varies. 

2. It costs more to produce milk high in fat than it does to 
produce low-testing milk. 

3. Actual market values on an open competitive market are 
always higher for high-testing milk than for milk with a low 
test. 

In practice, however, the purchase of milk on the basis of 
butterfat content Is attended with difficulties which have re- 
tarded its adoption in many communities, so that even to-day 
in such places milk is bought without reference to fat content, 
so long as it complies with legal requirements. The principal 
difficulties with the adoption of the butterfat content as a basis 
for the marketing of milk have been: (i) On the part of the 
producer, a lack of knowledge as to how the test was made and 
uncertainty — often well-founded — as to the accuracy of the 
tests; (2) on the part of the dealer, the added expense of making 
the test, and the trouble in satisfying producers as to the cor- 

277 



278 APPENDIX B 

rectness of tests. Even where the principle has been accepted, 
the methods of adjusting prices on the butterfat basis have not 
been uniformly fair to all concerned. 

The adjustment of prices according to butterfat content has 
usually been done by quoting a definite price per hundred- 
weight for milk of a given basic test, and then adding a few 
cents to the price per hundredweight for each additional tenth 
of one per cent of butterfat (each tenth of one per cent repre- 
senting one-tenth of a pound of butter in one hundredweight of 
milk) or deducting the same amount for each tenth of one per 
cent below the basic test. This base has most usually been a 
given test — as 3.5 per cent — though in many instances a broader 
base has been used — 3.3 to 3.7 per cent, for example. The 
former is the more desirable. This base should be established 
by taking the average of a number of tests made during the 
month. 

The differential — the premium or penalty allowed for each 
"point" or tenth of a per cent above or below the base — has 
usually been fairly near the price of butterfat. In Chicago for a 
number of years it was three cents. In other places it has been 
23^ cents or 3 cents. During the years 191 2 to 1914, inclusive, 
prices of butter at Chicago varied from 24 to 40 cents per 
pound, with the average close to 30 cents, so that the value of an 
extra pound of butterfat in milk over a given standard has 
about equalled its commercial value, though only approx- 
imately so. In numerous cases the low differential has been 
retained even with unusually high prices for milk. 

It is obviously unfair to the producer of high-testing milk 
to pay him no more than is paid the producer of low-testing 
milk. But just how much more he should be paid is not so 
easily answered. On the question of cost of production we are 
completely in the dark. It is known, for example, that it costs 
more to produce the richer milk. No definite data are available, 
however, to show the relative costs of producing 3.5 per cent 
or 4.5 per cent milk. We must therefore fall back on market 
values. 



APPENDIX B 279 

Two sets of questions arise in any consideration of the use of 
the butterfat content as a basis for the grading of milk: 

1. As regards the proper differential: 

a. What is the effect of too high or too low a differential 

on 
(i) The producer 

(2) The distributor 

(3) The character of the milk supply? 

b. Should a difference be made in the amount of the 

differential when it constitutes respectively a 
penalty and a premium? 

c. How can one at any given time arrive at the proper 

differential ? 

2. As regards the proper basic test: 

a. Does a low or a high basic test, as such, have any 

influence on the quality of milk produced for a 
given market? 

b. Is there any disadvantage in the fact that different 

communities have different basic tests ? 

c. Is any given basic test more desirable than any 

other? 

Before taking up these questions it should be pointed out 
that this discussion is not at all concerned with milk prices as 
compared with prices of other commodities, but is concerned 
only with the relative fairness of prices paid for milks of different 
degrees of richness in fat. For example, it is not the question of 
whether the price should be ^2.50 or $4.00 per hundredweight, 
but rather what should be the price of 3 per cent milk or 5 per 
cent milk when 4 per cent milk is of a given price. 

Again, this discussion is not concerned with the question of 
prices in one city as compared with those in another, but is 
concerned with the question of whether or not it matters to 
producer, distributor, or consumer, whether the price is quoted 
on the low-testing milk, on the high-testing milk, or on some 
intermediate grade. 

Let us take up first the questions regarding the differential. 



28o 



APPENDIX B 



What is the effect on the producer of a high or a low differential? 
Compare, for example, three producers producing respectively 
milk testing 3 per cent, 4 per cent, and 5 per cent. Suppose the 
price of 4 per cent milk is $2.80 per hundredweight, with a 
differential of 3 cents. The man producing 4 per cent milk 
gets the quoted price. The 3 per cent man then gets 30 cents 
less and the 5 per cent man 30 cents more than the 4 per cent 
man. What does each of the three get for the fat in his milk ? 
The answer depends upon the value assigned to the skim milk. 
At present prices of grains, the skim milk in icx) pounds of 
whole milk should be worth between 50 cents and $1.00. As- 
suming 80 cents as the value of the skim milk, we have $2.00 as 
the value of the four pounds of fat in the 4 per cent milk, or 
50 cents per pound. But on the same basis the 3 per cent man 
gets 53 cents and the 5 per cent man but 48 cents for each 
pound of fat in his milk. The low differential here penalizes 
the producer of the 5 per cent milk. 

Turning to Table I, lines 7, 8, and 9, columns 6 and 7, we 
find that had the differential been 5 cents, each producer would 
have received 50 cents for each pound of butterfat, again as- 
suming skim milk worth 80 cents for the amount in i hundred- 
weight of whole milk. Columns 10 and 11 on the same lines 
show that a 7 cent differential would penalize the producer of 
3 per cent milk. To summarize: 



5^ Differential 


5^ Differential 


7^ Differential 


Price 
per 
cwt. 


Av. value 

each lb. 

offat 


Price 
■per 
cwt. 


Av. value 

each lb. 

offat 


Price 
per 
cwt. 


Av. value 

each lb. 

offat 


$2.50 
2.80 
3.10 


$.566 

■5° 
.46 


^2.30 
2.80 
3-30 


^.50 
•50 

■5° 


$2.10 
2.80 
3-50 


^•433 
•SO 
•54 



Calculated price, 3% milk. 
Quoted price, 4% milk . . . . 
Calculated price, 5% milk. 



How does the differential affect the dealer? If the basic 
test on which prices are quoted coincides with the actual test 



APPENDIX B 281 

of the total volume of milk reaching the vats of the dealers, the 
differential does not concern him at all. If, however, he is 
buying milk testing on the average 4.5 per cent and selling a 
product testing 4 per cent, he is interested in having the differen- 
tial as low as he can get it. At any rate, if he standardizes at 
all, he cannot afford to have it higher than the price of butterfat 
in sweet cream. 

The character of the milk supply is affected by the differential 
to the extent that too low a differential or no differential will 
tend to drive the high-testing cows out of business or to induce 
farmers to remove some of the fat before shipping the milk. 
Too high a differential may tend to bring on a supply of milk 
richer than the consumer cares to buy, for the latter does not 
ordinarily seem willing to pay for a great amount of extra fat in 
milk. 

Taking up the second question, that of whether a difference 
should be made in the amount of the differential when it con- 
stitutes respectively a penalty and a premium, it would seem 
that there is no reason for making such a difference if the 
differential is properly adjusted. 

How can we at any given time arrive at the proper differential ^ 
In normal times the simplest and best method is that of follow- 
ing fairly closely the price of butterfat in sweet cream, which is 
usually a few cents over the butter market. If milk prices al- 
ways closely approximated the combined value of the skim and 
butterfat content, the price problem would be easy of solution; 
but milk prices usually fluctuate more widely than do butterfat 
prices, since butterfat can be and iis regularly stored in flush 
seasons. Milk prices cannot go below a price equal to the sum 
of the values of the skim milk and butterfat content. They 
may go much above. When they do go above such values, the 
following is suggested as a method of arriving at a differential 
which i3 fair to both the producer of 3 per cent and of 5 per cent 
milk, and not unfair to the distributor so long as he is not buying 
the milk for a lower use than the one which brought about the 
high prices: 



282 APPENDIX B 

1 . Determine the approximate value of skim milk. 

2. Determine the basic price of milk. 

3. Deduct the value of the skim milk in one hundredweight of 
whole milk from the basic price per hundredweight. 

4. Divide the remainder by the basic test. One-tenth of the 
quotient will then give a differential which would be fair to all. 

To illustrate: The present price of whole milk testing 4 per 
cent is ^3.60 per hundredweight. If the value of the skim in 
that amount of whole milk is 80 cents, then $2.80 represents the 
value of the four pounds of butterfat. Two dollars and eighty 
cents divided by 4 equals 70 cents, one-tenth of which would be a 
fair differential. The table on p. 283 carries this illustration 
still farther. It compares 4 per cent milk at various prices per 
hundredweight and with various differentials with 3 per cent 
milk and 5 per cent milk. Assuming that the skim milk is 
worth the same in the various milks (which is approximately 
correct), it shows, for example, that when 4 per cent milk sells 
at $2.00 and butterfat is at 30 cents, a differential of 3 cents 
would be fair to producers of other grades; but a differential of 
7 cents would give the man with 3 per cent milk but 16.7 cents 
per pound for the fat content, while the man with 5 per cent 
milk would get 38 cents per pound of fat. 

It has frequently been suggested that the basic test should be 
uniform throughout the state. At present Cleveland, for exam- 
ple, has a basic test of 3.5 per cent, whereas at Columbus the 
basic test is 4 per cent. What are the advantages or disadvan- 
tages of making the Columbus basis 3.5 per cent? Producers 
are advocating such a change, dealers opposing it. 

Would a high or a low basic test have any influence on the 
quality of the milk reaching the Columbus market .? A careful 
study of the accompanying table will show that so long as the 
differential is so adjusted as not to penalize the producer of one 
grade of milk as compared with the producer of some other 
grade, the quality of milk coming to the city will not be in- 
fluenced at all by the selection of any particular basic test. It 
may be, however, that with payment regularly made on a butter- 



APPENDIX B 



283 



fat basis, dealers will try to buy from the producers of low- 
testing milk, and thus reduce the quality of the milk received. 
But this would not be contingent on the particular basic test 
used in quoting prices. 

Table I 

The Operation of Given Differentials with Comparisons on 4% Base 

Value of I lb. butterfat in whole milk, assuming value of skim 8o<^ for the amount 











in 


100 


lbs. of whole milk 










Test 


Differential for each 1% of test over or under base 




3i 


d 


St 


6i 


7i 




Price 
per 
cwt. 


Av. 
value 
per lb. 

fat 


Price 
per " 
cwt. ^ 


Av. 
alue 
erlb. 
fat 


Price 
per 

cwt. 


Av. 
value 
per lb. 

fat 


Price 
per 
cwt. 


Av. 
value 
per lb. 

fat 


Price 
per 
cwt. 


Av. 
value 
per lb. 

fat 


3% 


$1.70 


$.30 


^1.60 $ 


267 


$1.50 


^•233 


^1.40 


^.20 


^1.30 \ 


t.167 


4% 


2.00 




30 


2.00 


30 


2.00 




30 


2.00 




30 


2.00 


•30 


5% 


2.30 




30 


2.40 


37 


2.50 




34 


2.60 




36 


2.70 


•38 


3% 


2.10 




433 


2.00 


40 


1.90 




366 


1.80 




333 


1.70 


■30 


4% 


2.40 




40 


2.40 


40 


2.40 




40 


2.40 




40 


2.40 


.40 


5% 


2.70 




38 


2.80 


40 


2.90 




42 


3.00 




44 


3.10 


.46 


3% 


2.50 




566 


2.40 


533 


2.30 




50 


2.20 




466 


2.10 


•433 


4% 


2.80 




SO 


2.80 


50 


2.80 




50 


2.80 




50 


2.80 


•SO 


S% 


3.10 




46 


3 -20 


48 


3-3° 




50 


3-4° 




52 


3 -SO 


•54 


3% 


2.90 




70 


2.80 


666 


2.70 




633 


2.60 




60 


2.50 


• 566 


4% 


3.20 




60 


3.20 


60 


3 -20 




60 


3 -20 




60 


3.20 


.60 


S% 


3-50 




54 


3 -60 


56 


3 -70 




58 


3.80 




60 


3-90 


.62 


3% 


3-3° 




833 


3.20 


80 


3 -SO 




766 


3.00 




733 


2.90 


•70 


4% 


3.60 




70 


3.60 


70 


3 -60 




70 


3 -60 




70 


3.60 


.70 


5% 


3-90 




62 


4.00 


64 


4.10 




66 


4.20 




68 


4-3° 


.70 



Again, if dealers regularly sell milk testing, for example, on an 
average 4 per cent, while quoting prices on the basis of 3.5 per 
cent milk, their margin of gross profit will appear to be wider 
than it actually is. 

Is there any disadvantage in the fact that different com- 



284 APPENDIX B 

munities have different basic tests? At least one disadvantage 
at once presents itself. In the marketing of any agricultural 
product it is desirable to have quotations in different communi- 
ties on the same basis, so that buyers and sellers may the more 
readily compare values on the different markets. It is the 
opinion of the writer that in this case also it would be advan- 
tageous to producers, at least, to have quotations in all parts of 
the country based upon the same grade of milk. 

In view of the points above considered, it appears that: 

1. The differential allowed for variations from the basic test 

should follow the prices of butterfat in sweet cream, 
or at any rate should not be below the current wholesale 
quotation for butter of the higher grades. 

2. The basic test should correspond as closely as possible 

with the test of the major portion of the milk sold. 



APPENDIX C 

THE dairymen's CO-OPERATIVE SALES COMPANY 

Local Branch, County State 

Contract of P. O. Address 

Present Buyer Address 

Deliver receiving station at Estimated winter production 

Product Ship independently to 

at present Sold locally in Estimated summer production 

(Cross out all but the correct statement) 

THIS AGREEMENT, made this day of 

19. ., by and between THE DAIRYMEN'S CO-OPERATIVE SALES COM- 
PANY, organized under the laws of the State of Ohio, party of the first part, 

and 

of the Township of County of State of 

party of the second part. 

WITNESSETH: That in consideration of the sum of ONE DOLLAR ($1.00), 
paid by the party of the first part to party of second part, the receipt whereof is 
hereby acknowledged, and of the covenants and agreements herein contained, 
the said parties have agreed and do hereby agree as follows: 

1. Party of the second part agrees to subscribe for one-tenth share of the 
capital stock of the said party of the first part for each cow owned or kept by 
said second party (with a minimum subscription of one share and one-tenth 
share for each additional cow owned above ten cows) and does hereby subscribe 

for shares of such capital stock, each share of the par value of 

^2.50 which sum he agrees to pay in cash on the execution of this agreement for 

each share of stock and fraction thereof as subscribed by him, viz: 

Dollars {$ ); and the Secretary for the time being of said Company is 

hereby authorized to sign the name of the second party to the original stock 
subscription book of said Company for the said number of shares. 

2. That the party of the second part hereby agrees to consign and hereby does 
consign to party of the first part for sale all the milk and cream produced upon 
any farm controlled by party of the second part, except such milk as is required 

for home, farm or local consumption, for and during the term beginning 

to , and thereafter for six months periods, unless 

60 days' notice is given in writing by either party before the expiration of any 
contract period, and the party of the second part further agrees to maintain his 

28s 



286 APPENDIX C 

dairies, barns and all equipment and utensils used in producing milk and cream 
in conformity to the sanitary requirements of the State, county, district, or 
municipality where said milk and cream shall be sold, and agrees to deliver said 
milk and cream pure and unadulterated to the shipping station, condensary, or 
such other manufacturing plant as is designated by the party of the first part, 
or if party of the first part should be unable to dispose of the said milk during 
any portion of said period, party of the second part shall be so notified and in 
such an emergency it shall be optional with party of the second part whether 
they manufacture their products at home or at a place provided and operated 
by the party of the first part. 

3. The party of the first part agrees to sell and dispose of the said milk or 
cream to the best advantage for account of and to a buyer or buyers approved 
by and satisfactory to the party of the second part. 

4. IT IS FURTHER AGREED that the party of the first shall receive a 
commission from the proceeds of the sale not to exceed one per cent of the selling 
price thereof during the period of this contract, and the said commission shall be 
deducted from the proceeds of such sales. 

5. IT IS MUTUALLY COVENANTED AND AGREED that in case either 
party fails to perform the covenants herein agreed to be performed by such 
party, the party so failing shall and will pay to the other the sum of Five Dol- 
lars ($5.00) per cow for cows for which party of the second part 

has taken stock, which sum is hereby fixed and agreed upon as the liquidated 
damage for such failure, and that the same shall in no event be considered a 
penalty. 

IN WITNESS WHEREOF the parties to these presents have hereunto set 
their hands and seals, the day and year first above written. 

THE DAIRYMEN'S COOPERATIVE SALES COMPANY, 

By Pres. 

Attest: Sec'y- 

Stockholder sign below. 

(L.S.) 

Signed, sealed and delivered in the presence of 



Witnesses 
for Stockholder. 



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288 



APPENDIX D 



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APPENDIX D 



289 



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1 


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290 



APPENDIX D 



u 



1 


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CO 



APPENDIX D 



291 



g 



a 


IT) IT) e» 10 10 10 

ON 00 00 N ■'I- N r< 

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292 



APPENDIX D 



u 
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APPENDIX D 



293 






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ds 


l-t w 


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in vd 


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d 


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fi 


m 


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r^ 


00 


dv 


8 

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00 


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a 


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aa 


8n 


a 


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Ov 

1-4 


ON 


l-( 
ON 
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ON 


ON 


On 


On 


On 


o 



APPENDIX D 



295 



o 



1 


Q vo t^ 

ON 0^ Ov >-' ro 00 

1-1 1-1 l-l N t*^ Ti- c<^ 




N N ^^ rf- 00 b- -* 
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tfl. 


d 

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Q >J^ «^ 
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w 1-1 hi M N t^ C<1 

tfl. 




N M C^ ■* NO l^ ■* 
CO CO CO ■* CO 00 VO 

r> M f* c^ CO -^ Tj- 


^ 


Q l> 
00 00 00 Ul ■>*■ CO 

w M 1-1 N N r<^ fTi 




c^ ?» c<l ■* 10 ->i- M 
CO CO CO ■»*■ N VO ■* 

<<) PJ N C) CO Th ^ 

•w. 


1 


g 1^ 

vo ^ ^ 00 u-i •* 00 
>.H M M t-t N c^ r^ 

tfl. 




ON VO 00 w 
« « N C^ Ti- Th 

M N C<> M CO ■* Tl- 

■W3. 


S 


t^ 

IT) 10 u-1 00 10 h-c 00 
w i-i w M N ro m 




VO VO NO NO 00 VO 
00 00 00 00 Ov Th ON 

W 1-1 1-1 1-1 C< CO CO 

■6(1 


t 


iJ^ "O M 
m Ti- -* "1 >-i u-l N 

M »-l HH l-l N M en 




VO VO VO VO l^ 00 00 
00 00 00 00 VO ■* ■* 

1-1 1-1 iH M rj CO CO 
to. 


< 


10 iri VO N 
« i-i w <S» Tl- w On 

M M M M M C4 N 




NO VO VO VO l^ 00 00 

00 00 00 00 VO ■*•■<*■ 

1-1 hH M 1-1 M CO CO 


1 


VO "J^ MD r^ 

0» M N N -^ <n 
►H w 1-1 l-l i-l N en 




VO VO VO NO t-~ 00 1-1 
00 00 00 00 NO -rh t«» 

1-1 1-1 hH 1-1 C* CO CO 




10 IT) in 10 VO ■* ^ 

CO CO CO c<^ t^ l>* 

M |_| l-l M l-l N CO 

■fcQ. 




VO NO l^ t^ M 00 t-> 
00 00 On On CO Tj- t^ 

w M 1-1 i-H r) CO CO 


1 


VO 1-1 VO 

^ 00 00 t~>. M M I-" 

M t-H 1-4 M N CO CO 
tflL 




N 00 >-i 

cj M o» N CO -"d- t^ 

C» C* M C< N CO CO 

tfl. 




VO VO VO VO On M 
00 00 00 t^ N N VO 

l_l w l-l w N CO CO 




M 00 1-1 
C^ W C» N CO ■* ■* 

C^ f* M C^ M CO tJ- 

tfl: 


8 


VO VO VO VO VO C^ 

00 00 00 iNw ■<*• CO VO 

>_ l_l 1-1 1-1 C^ CO CO 




o» 00 ■* 

OJ C< C^ C< CO ■* VO 
N f» (^ P» C< CO Th 


1 


CO -^ VO VO !>. 06 0\ 

1-1 M hH 1-1 1-1 1-1 1-1 

On On On 0^ On On On 


1; 



CO -^ vPi NO «>. 06 Ov 

tH l-l M hH 1-1 1-1 1-1 

ON On 0> ON On On On 

M H4 M IH H4 1-1 M 



296 



APPENDIX D 



u 



g 





00 00 


on 


f<-i 


t1- 


n 


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T^ 


ri-i 


CO 


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M Mrf 


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M N N ■* 


VO ->i- 


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trt. 


w 


N 


m 


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on 


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u-i 


n 








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00 a\ 


On 


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iri 





NO 




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1-1 C< C< -* l-l 




:^ 




HM 


N 


r^ 


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M 1-1 1-1 11 C» 


M N 




vo ^o 


"-1 


m 


Ti- 
















00 00 


J^ 


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CO CO VO N CO 

1-1 w 5 ^ 


1-1 ts. 


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M M 

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f^ 


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M M 








MH 








1— 1 H4 




Ov On 


OS 


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On 


On 
1-1 


On 




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hH 1-1 h-( 1-4 HH 


On On 

M 1-1 



2 S" 



U 1) 

CO V3 



APPENDIX D 



297 





vo so vo vo m m m 
00 00 00 00 t^ c^ t^ 

11 M M M ^» r<-) CO 




m to vo 10 

On t^ 00 c< c-» t^ VO 

1-1 HI M t^ to to to 


1 


^ VO VO VO lO 
00 00 00 00 t^ 5 

1-1 M w iH c^ ro ro 




10 IT) Q to to 

00 t^ t^ c< VO vo 

1-1 (I M r< to to to 


1 


\0 VO ^O \0 10 Q 
00 00 00 00 i^ 6 

i-i M (H M N to c«-l 

■w. 




U-) 10 10 Q to to 

j-x ^s. to <>» to vo 

M W IH M to to to 

V3. 


CO 


ro to VO VO IT) 
VO vo 00 00 1^ 

1-1 11 1-1 1-1 c^ CO to 




to to Q to 
to to •>♦■ t>. t^ to 

11 M >-l M P< to to 

tfl. 




to to \0 ^ ^O ui ui 
~0 VO 00 00 00 tv. t>) 

^ "• " " " ^' ^ 




to Q to to N 
to ■«*• to NO rj- t^ to 

M IH l-< M c< N to 




to to to VO vo 1-0 10 
^ vo VO 00 00 t-~ c^ 

w 1-1 1-1 M 1-1 t^ to 
■W3. 




to to Q 
to to to NO to to 

w w M w N t^ to 


1 


to to to ^O VO vo 10 
VO ^O VO 00 00 t^ <^ 

^ M „ « « C^ tA 




to to 
to t^ f* to r^ 00 to 

1-1 M l-H w N w N 
V5. 


1 


to to to VO VO 10 li^ 
\0 \0 M3 00 00 1^ t^ 

^ « M « M ci to 




to to to 

to to N to IH 00 to 

« ^ M M C^ «■ N 


4 


to to to "O "O vo lo 
\0 VO ^ 00 00 1^ t^ 

w „• „ 1^ „ ci to 




to to to to to 
-<*• -^i- to -5h ts» t^ 

"-; i-i 1-1 >-i N t^ « 


1 


\0 \0 "O VO VO u^ u^ 
00 00 00 00 00 t^ N 

^ « M M « Ci to 




to to to 
l^ t^ VO NO t^ t^ 

1-1 W 1-1 HH C< t>» to 


1 


\0 VO vo VO \0 in 10 
00 00 00 00 00 t^ PJ 

« M « « «• Ci t^ 




to to J^ r< 

00 On t^ 00 M l-^ 

IH w 1-1 n c< to to 




VO VO \0 ^ VO li^ vri 
00 00 00 00 00 l^ <S 

^^ ^ ^ » ^ ^ 




to to « 
ON l^ 00 ri M t^ 

M t^ w M t^ to to 





to tJ- L^ \d t^ 06 (> 
Cn O^ C^ 0^ On On On 


c5 

e5 


to ^ to vd ti. 06 On 

>H HH 1-1 l-t M HH l-l 

On On On On On On On 



298 



APPENDIX D 



vo g^ M O O >J1 Q 

N O t^ f1 O 00 On 

c^ CI d c^ m en en 



11 1-1 M c<-i en 



N r< l~^ N l^ i-n O 

M 11 0> N 00 00 ON 



N N M N c^ en m 



?g^' 



c» c^ M c< Pl en en 



'O 

CO 

6 



CO 



m m en en en 00 t^ 
NO NO VO VO en O en 



r< w w c^ (S en en 



en en en en 
NO NO NO NO 



►H i-i 1-1 M e^ en en 



8^ 



g^ 



w c^ en CO 



*->^ 



O en e^ c» O m O 
O 00 i^ ON "^ en "1 



cj M w 11 c^ en en 



a 



■Pi, 



M w M PI en en 



1-1 w M M M en en 



u 
d 



^•2 



en ■>*• 10 NO r^ 00 ON 

n t-t h-t l-H hH hH n 

ON On Qn On On On On 



^« 



en -^ IT) NO t^ 00 On 
ON On On On On On On 



APPENDIX D 



299 



o 





>+ 


ifl VO 


10 tn 


m 


ui ■ 


a 


t^ 


t^ CT\ 


On 


ON On 


tn « in • 


M 


w w 


N w 


1-4 w 


en -i- ■* • 




■Ml 












On 


IT) m 


u-i in 


m 


8 8 i? : 


:l 


VO 


l^ On 


ON 


ON ON 


•w. 


w w 


N i-i 


1-1 W 


tn -* T^ - 




On 


n^ ^> 


tn 10 


m VO Q • 

On On 00 VO 00 


^ 


^ 


t^ ON 


On 


^ 















tft 


M H-l 


c^ w 


1-4 M 


c^ m en 




r<^ 





10 >J^ 


m 


00 Q • 
m n5 00 


■pi. 


VO 


t^ ON 


On 


On on 


CO 


•^ 


l-H 1-1 


N M 


>H M 


M en en • 




w 


■* 


VO IT) 


m 


m 


^ 


10 


lO VO 


t-> VD 


VO VO 


■rh -* 00 ■ 


tA 


l-C M 


HH hH 


I-i 1-1 


N en en ■ 




M 


00 00 


10 in 


in 


I^ • 


u^ 


t)- 10 


t^ VO 


VO VO 


en 00 00 ■ 


■^ 


t-H HH 


M t^ 


1-4 1-1 


M e^ en • 






w rr> 


ui m 





N 


S 




-* VO 


I^ VO 


VO VO 


•<*■ 00 e^ • 


< 






h-t H-l 


l-H 1-4 


c^ e^ en - 


5s 




l^ l^ 


00 li-l 





• 




Tj- VO 


-* VO 


VO VO 


Th GO en - 


S 






l-( M 


M h-4 


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Ti- U-1 


in 


in 


0' • 






l-^ IV. 





ON On 


N 00 - 






N M 


w 1-1 


PJ en en 






Th u^ 


m 


in 


0000 


Q 




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ON On 


M NO QO 


^ 




M M 


M N 


M 1-4 


^» en en -"d- 






■* iJ^ 


in in 


in 


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t^ 1-- 


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ON ON 


M NO 00 N 














t*. 






11 N 


HH hH 


N en en ••* 






■* IJ^ 


m m 


in 


in m 


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l^ t^ 


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M Tj- m 


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1-1 M 


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1— 1 M 




M M M «4 




ON 


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ON Ov 


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On On On On 

M l-H W W 



U 

d 



300 



APPENDIX D 



•s 



o 



^ 



a 


OOOQ«oOOOQi£^ 


vn O 

b* 00 


tfl. 


«n e»% 




O OiJ^-^i^O O O Q ^J^ 


O N 


MHIHHI-ltHI-ll-lNN 

•60. 


CO en 


a 


Ti-ii^v8 »jTO*^ irtvo 8^ 




mhii-ii-ii-iwhmNN 

tfl. 


CO CO 






CO O 


tfl. 


CO CO 


a 


OOir>oowiO"^OioO 


O CO 


MWMMI-IMI-II-CMM 
tfl. 


CO CO 


^ 
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l-H M 


■w. 


C» CO 




MDOOri-OOQOOO 


8vg 


»H HH HH h-t IM M t-^ 

•w. 


N M 


§> 
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i?v2 


IH h-( 1-1 W h-l tH M 
tfl. 


C^ c« 


i 
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iriiAiplOOi^iJ^OOQ 
M i-i COM T^■^^oc<^'<i•0 


O O 
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HWMMHWMI-II-CN 

■w. 


r< c< 


1 




O 00 


MMMMMMMMMM 


CO c< 


2 






MMMMMMMMMM 


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4 


■t^O00O"^OOO"1 


■^ .ST 


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CO CO 


1% 




































' 



APPENDIX D 



301 



1 


«/^ 

00 M N 00 00 
>-< M ro rn m 




ir, 

00 


2v8 8 


■W3. 


po ro Ti- 


E^ 

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10 »J1 "^ 
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u-> Q 

00 


00 VO 





g Q 10 10 

w N d d m 




vScg 


wi On 


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N f^ to 


1 


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VO 00 
w n 


VO u-i 
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li-> If) 10 

CO Tj- U-1 fN IT) 

i-i w r» N m 




^vS 


IT) Q 
c<-> ui 


V5. 


N N m 




10 >J^ vo U-) 

f^ Ti- ^n N -rh 

>-< i-c r< p» ro 




^v8 

M H 


IT) Q 


S 

•2, 


10 10 ui 
w 11 « 11 m 




° 2. 


000 


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N c^ N 


1 


vo 10 10 K-i in 

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2. 


000 


n »1 

tfl. 


n « N 


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VO 00 


8 8 8 


tfl. 


r» m m 


V 

1 


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vS<g 


8 8 8 




N m m 


2 


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tfl. 


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4 


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n N 

tfl. 


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M 


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^ 


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M 


c 

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1 


3\ On 

M M 


f^ 06 0\ 

On Ov 0> 
11 ^^ M 



302 



APPENDIX D 



o 





o 


lo 00 


f^ 


Ov 


2-8 


i5 


■* 


M 


1-" 


■* 


•<(■ 


Q 




« 


N 


<S 


r«-> 


Th -* 




n 


lO 


00 


r^ 


OS VO O 1 


^ 


-^ 


N 




'*• 


-<<- 


O O 


J^ 


V5. 


C^ 


N 


c^ 


CO 


Tt- •* 




HH 


lO 




CO 


Ov 


M t^ 


^ 


h-( 


N 


n 


O 


vn 


1^ o 


^ 














O 




« 


« 


<s 


CO 


CO ■^ 




vn 


VO 


-t(- 


-* 


r» 


CO O 


■fx. 


ON 


On 


o 


o 


VO 


c^ 


to. 


^ 


N 


N 


c^ 


CO -^ 




VO 


VO 


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^ 


c<> 


lO CO 


§= 
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o\ 


ON 


O 


o 


VO 


w OV 


■W5. 


M 


M 


N 


cq 


CO CO 


^ 
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as 


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<7\ 


■^ 


Ov c^ 


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00 


Ov 00 


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h-t 


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c^ 


M CO 




CO 


f«-> 


lo 


v8 


Ov 


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to 


lO 


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t-i On 


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M 


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c^ c^ 


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CO 
CO 


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^ 


to. 


t-t 


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03 



BIBLIOGRAPHY 

Books 

Carver, T. N., Principles of Political Economy, 1919. 

Cheney, E. P., Industrial and Social History of England. 

Fairlie, John A., Essays in Municipal Administration. 

Hemenway, Henry B., American Public Health Protection. 
Bobbs Merrill, Indianapolis, 1916. 

Jordan, Edwin O., The Municipal Regulation of Milk Supply. 
American Medical Association. 

King, C. L., Lower Living Costs in Cities. 

King, C. L., The Price of Milk, 1920. 

Lincoln, E. E., Results of Municipal Electric Lighting in Mas- 
sachusetts. 

Macklin, Theodore, The Marketing of Agricultural Products, 
1921. 

Marshall, Alfred, Principles of Political Economy. Sixth edi- 
tion. 

MacNutt, J. Scott, The Modern Milk Problem. Macmillan, 
1917. 

North, Dr. Charles E., The Farmers' Clean Milk Book, 191 8. 

Parker, H. N., City Milk Supply. 

Rowe, L. S., Problems of City Government. 

Savage, W. G., Milk and the Public Health. 

Spargo, John, Common Sense of the Milk Question. 

Straus, Lina G., Disease in Milk. 

Taylor, H. C, Agricultural Economics, 1919. 

Taussig, F. W., Price Fixing by a Price Fixer. Quarterly 
Journal of Economics, Vol. XXXIII, p. 219. 

United States Industrial Commission Report, Vol. VI, 1900. 
Distribution of Farm Products. 

Ward, A. R., Pure Milk and the Public Health, 1909. 

317 



3i8 BIBLIOGRAPHY 

Wicks, Charles W., and Committee, Preliminary Report of 
Joint Legislative Committee on Dairy Products, Livestock, 
and Poultry. Albany, N. Y., 1917. 

Bulletins and Pamphlets 

Alvord, H. C, Milk Supply of Two Hundred Cities and Towns, 

1903- 

Barber, W. H., Milk Marketing Conditions in Kansas City, 
September, 191 8. U. S. Bureau of Markets. (Unpub- 
lished.) 

Boston Chamber of Commerce: The New England Milk Ques- 
tion, 1917. 

Boston Chamber of Commerce: Investigation and Analysis of 
the Production, Transportation, Inspection, and Distribu- 
tion of Milk and Cream, 191 5. 

Boston Chamber of Commerce: Grading of Milk and Cream, 
1916. 

Breed, R. S., and others: What is Meant by Quality in Milk. 
Geneva (N. Y.) Agricultural Experiment Station Bulletin 
438, 1917. 

Brew, James D., Milk Quality as Determined by Present Dairy 
Score Cards. Geneva (N. Y.) Agricultural Experiment 
Station Bulletin 398, 191 5. 

Cance, A. E,, Cost of Distributing Milk in Six Cities and Towns 
in Massachusetts. Massachusetts Agricultural Experi- 
ment Station Bulletin 173, 1917. 

Campbell, H. C, Comparison of the Bacterial Count of Milk 
with the Sediment or Dirt Test. U. S. Department of 
Agriculture Bulletin 361, 1916. 

Clement, C. E., and Warber, G. P., The Market Milk Business 
of Detroit, Michigan, in 1915. U. S. Department of 
Agriculture Bulletin 639, 191 8. 

Davis, L. M., Dairy Marketing Conditions in New Hampshire. 
New Hampshire Agricultural College Extension Service 
Bulletin 8, 1917. 



BIBLIOGRAPHY 319 

Doan, C. F., The Milk Supply of Twenty-nine Southern Cities. 

Bureau of Animal Industry Bulletin 70, 1905. 
Dillon, John J., The Milk Problem, 1916. N. Y. Department of 

Foods and Markets. 
Firestone, Ship by Truck Bureau, Akron, Ohio, Bulletin i. 
Governors' Tri-State Milk Commission Report. Department 

of Agriculture Bulletin 287. Harrisburg, Pa., 1917. 
Grand Jury Report, Franklip County, Ohio. Unpublished 

abstract, 1920. 
Harbison, Thos. B., Milk and Its Distribution in Philadelphia, 

191 7. 

Harding, H. A., and others. The EfFect of Certain Dairy Opera- 
tions upon the Germ Content of Milk. N. Y. Agricultural 
Experiment Station Bulletin 365, Geneva, 191 3. 

Hedrick, W. O., and Anderson, A. C, The Milk Commission 
Plan. Michigan Agricultural College Special Bulletin 99, 
1920. 

Hibbard, B. H., and Erdman, H. E., Marketing Wisconsin 
Milk. Wisconsin Experiment Station Bulletin 285, 1917. 

Hughes, R. D., Report on Municipal Milk Supply for the City 
of Winnipeg. Winnipeg, Canada, 1919. 

Interstate Commerce Commission, Docket No. 8555, Brief for 
New York Sanitary Dealers, 191 6. 

International Milk Dealers' Association Annual Reports. 

International Association of Dairy and Milk Inspectors Annual 
Reports. 

Jones, C. M., The Milk Supply of Minneapolis, 1914. 

Jennings, Irwin G., A Study of the New York City Milk Prob- 
lem. National Civic Federation, New York City, 1919. 

King, Clyde L., The Price of Milk in Pittsburgh, 1920. 

King, Clyde L., The Price of Milk in Philjadelphia, 1920. 

Legislative Document No. 29 (New York). Report of Fair 
Price Committee of the City of New York, 1919. 

Marketing and Farm Credits. Reports of Conferences, 191 3 to 
1916. 

Mayor's Milk Committee, Report of. (New York City, 1917.) 



U 



320 BIBLIOGRAPHY 

Massachusetts State Department of Health. Report of Special 

Milk Board, 1916. 
Mead, Elwood, Progress Report on the Production and Dis- 
tribution of Milk. California Agricultural Experiment 

Station, Circular No. 175, 1917. 
Milwaukee Bureau of Economy and Efficiency, Bulletin No. 13, 

Milk Supply, 1917. 
More Economic Distribution and Delivery of Milk in the City 

of Chicago. Municipal Reference Bulletiji No. 8, 191 7. 
New York Department of Foods and Markets, Bulletins of. 
North, Dr. Charles E., Milk Survey of the City of Rochester, 

New York. 
Overman, O. R., Food Values and Dairy Products. Illinois 

Station Circular 235, 1919. 
Pattee, Richard, What Organization Has Done for the Milk 

Business. Massachusetts State Board of Agriculture, 

Circular 79, 191 8. 
Pearson, F. A., Seasonal Cost of Milk Production. Illinois 

Agricultural Experiment Station Bulletin 224, 1919. 
Preliminary Report, Commission of Inquiry into the Agricul- 
tural Resources of the State, 1916. Providence, Rhode 

Island. 
Public Service Commission of Pennsylvania, File No. 357. The 

Philadelphia Milk Exchange vs. The Pennsylvania Railway 

Company. 
Report of Milk Committee. Food Controller for Canada, 

Ottawa, Canada, 1917. 
State Market Director of California Annual Reports. 
Thomsen, Frederick L., Some Economic Aspects of City Milk 

Supply in Connection with a Survey of the System of Milk 

Distribution in the City of Madison (Wis.), 1919. 
Turner Centre Creamery Association, Auburn, Maine, Annual 

Reports. 
War Industries Bulletins Nos. 2 and 3, War Industries Board. 

Washington, D. C, 1919. 
Weld, L. D. H., Marketing in the City of New Haven, Conn. 



BIBLIOGRAPHY 321 

Yoke, H. S., Operating a Cooperative Motor Truck Route. 
Farmers' Bulletin 1032. U. S. Department of Agriculture, 
1919. 

Periodicals 

American City. 

Country Gentleman. Philadelphia, Pennsylvania. 

Chicago Dairy Produce. Chicago, Illinois. 

Creamery and Milk Plant Monthly. Chicago, Illinois. 

Dairymen's League News (New York). Official Organ of 
Dairymen's League. 

Dairymen's Price Reporter. Youngstown, Ohio. Official 
Organ of Dairymen's Cooperative Sales Company. 

Duncan, C. S., Journal of Political Economy, April, 191 8. 

Farm Economics Journal, October, 1919. 

Hoard's Dairyman. Fort Atkinson, Wisconsin. 

Journal of Political Economy. Chicago, April, 1918. 

Market Reporter. U. S. Bureau of Markets, Washington, 
D.C. 

Milk Plant Letters, U. S. Department of Agriculture, Washing- 
ton, D. C. 

Milk Magazine. Waterloo, Iowa. 

Milk News. Chicago, Official Organ of Chicago Milk Produ- 
cers' Association. 

Milk Reporter. Essex, New Jersey. 

Milk Trade Journal. 

Monthly Milk Price Reports, U. S. Department of Agriculture, 
191 8-1920. 

Monthly Summary of Foreign Commerce of the United States. 

National Stockman and Farmer. Pittsburg, Pennsylvania. 

New England Dairyman. Boston, Official Organ of New Eng- 
land Milk Producers' Association. 

New England Homestead. Springfield, Massachusetts. 

New York Produce Review and American Creamery. New 
York City. 

Northwestern Dairyman and Horticulturist. Seattle, Wash- 



322 BIBLIOGRAPHY 

ington. Official Organ of United Dairy Association of 
Washington. 

Ohio Farmer. Cleveland, Ohio. 

Pacific Dairy Review. San Francisco, California. 

Pacific Municipalities, Vol. XXXIII, December, 1919. 

Prairie Farmer. Chicago, Illinois. 

Rural New Yorker. New York, N. Y. 

Weekly News Letter. United States Department of Agricul- 
ture. Washington, D. C. 



INDEX OF SUBJECTS 



Accounts, collection of, 91 

Advertising campaigns, 10 

Advertising milk, 8 
constructive, needed, 9 

Advertising and the surplus, 107 

Age of butter and other products, 
12 

Age of milk, il, 72 

Alderney Dairies, 115 

"All commodities" index of 
prices, 302 

Alternative markets, 53-55 

American Association of Medical 
Milk Commission, 37 

American Public Health Associa- 
tion Committee on Milk Stand- 
ards, 39 

Arbitrator, milk price, 261-262 

Associated Dairymen of Cali- 
fornia, 180 

Associated Milk Producers of 
San Francisco, 158 
incorporation, 178 

Babcock test, 44, 277 
adopted as basis for payment, 

44 
Bacterial count, depends on dairy- 
man, 20 

bacterial count, 29 

for various grades of milk, 
38-40 

bacterial count versus barn 
scores, 21 



Baltimore producers' organiza- 
tion, 149 

Baltimore milk prices, 213, 295, 
310 

Barn scores versus bacterial 
count, 21 

Basis of payment for milk, 42-43 

Basic test, 279, 282-283 

Beloit milk regulations, 25 

Black Death, 135 

Boston, carries burden of inspec- 
tion, 27 

Boston Chamber of Commerce, 
milk study, 41 
recommends grading of milk, 41 

Boston Milk Producers' Com- 
pany, 146 

Boston Milk Producers' Union, 

144-145 
Bottling, compulsory, 35 
Boycott, early, 139 

use of, 160-161 

Chicago, 176 
Bread, compared with milk, 14 
Bucyrus, Ohio, milk prices, 297 
Butter, age when consumed, 12 

milk used in manufacture 
of, 5 

returns to producers of, 137 

where produced, 105 
Butter and cheese prices as basis 

for milk prices, 207 
Butter and corn prices as basis 

for milk prices, 210 



323 



324 



INDEX OF SUBJECTS 



Butter prices, New York, 314-315 
Butterfat basis, 277 
Butterfat prices as a basis for 
milk prices, 212 

California Milk Producers* or- 
ganization, 158 

Cans, ownership, 79 
charges for, 80 

Cash-and-carry system, 98 

Centralization in the milk busi- 
ness, 84 
results of, 94 
tendency towards, 130 

Centralized system, savings under, 

131 

Certified milk, 27, 36, 37 
little produced, 38 
influence on quality of regular 

supply, 38 
state control of, 37 
high cost of, 38 
Cheese factories, as competitors 

for milk, 57 
collect milk for city use, 67 
Twin City Milk Producers 

operating, 107 
Cheese, as a basis for milk prices, 

206 
milk used in manufacture of, 5 

age when used, 12 
made largely from surplus 

milk, 105 
non-perishable, 105 
made largely in summer 

months, 106 
return to producers of, 137 
Chicago Milk Commission, 37, 
200 



Chicago, milk consumption in, 45 

source of milk supply, 45 

milk regulations, 26-28 

milk prices, 212, 216, 302, 
306 

milk producers organize, 152 
Chicago Milk Producers' Asso- 
ciation, incorporation, 175 

plan of organization, 176 

influence on prices, 219, 221, 
223 
Chicago Cooperative Milk Mar- 
keting Company, 177 
City milk trade, classes of, 227 

determination of prices, 228 

margins, 229 
City milk prices, 226 

relatively constant, 232 

various cities, 302-315 
City versus state milk control, 

26-28 
Clarification, 22 
Clayton Amendment, 135 
Cleveland milk producers or- 
ganize, 149-150 
Cleveland milk prices, 212, 213, 

216,300,312 
Coit, Dr. Henry L., 35 
Collection of accounts, 91 
Collection of milk from farmers, 

62 
Collective bargaining, 134, 155 

as a remedy, 264 

here to stay, 269 

in agriculture, 135 

need of in dairying, 136-138 

historical sketch of, 134 

development, 134-136 

in England, 135 



INDEX OF SUBJECTS 



325 



Collective bargaining in the sale 
of milk, historical sketch, 138 

Columbus, milk prices, 212, 213, 
216, 236, 299 
quality of milk sold, 32 
milk shortage in, 126 
minimum fat requirement, 32 

Commissions charged by cooper- 
atives, 164 

Commission to control price. See 
milk commission 

Committee on Milk Standards, 39 
grades recommended by, 39 

Competition and quality, 32 

Competitive system, results of 
abolition, 133 

Concentration desirable, 266 

Conclusions, 266 

Condensed milk, influence on 
milk prices, 225 
returns to producers of milk 

for, 137 
made largely from surplus, 105 
non-perishable, 105 
high specific value, 105 
made largely in summer, 106 
whole milk used in manufac- 
ture of, 5 
uncertain markets, 56 

Consolidated Milk Company, 
failure of, 141 

Consolidation of milk com- 
panies, 94 

Consumption of milk, in Mil- 
waukee, 45 
in Chicago, 45 
of whole milk, 5-6 
per capita, 8 

Contracting, method of, 161-162 



Contract of Dairymen's Cooper- 
ative Sales Company, 285-286 

Contractual relations between 
producer and consumer, 78 

Cooperative Country plants, 158 

Cooperative Creameries Asso- 
ciation, 142 

Cooperative Milk Distribution, 

183 

degree of success, 185 
Cooperative milk distribution, 
by milk producers' associa- 
tions, 159 

by producers, 183-187, 259 

by consumers, 258 
Corn prices as basis for milk 

prices, 210 
"Cost" and "spread," confusion 

of, 118 
Costs of delivery, 124 

variations in, 125 
Cost of distribution, 117, 125-129 

farmers' interest in, 118 
Cost of inspection by state versus 

by city, 27 
Cost of production and price, 

191, 198 
Cost of production and surplus, 

107 
Country milk plants, 64 

cooperative, 158 

limitations of, (i(> 

ownership by producers, dl 
Cream shipments, 48 
Creameries, as competitors for 
milk, 57 

collect milk for city use, (irj 

in New York milk zone, 142, 
159 



326 



INDEX OF SUBJECTS 



Dairyman more important than 

the dairy, 20 
Dairymen's Cooperative Sales 
Company, 151, 157, 168 

advisory council, 170 

elections, 171 

plan of adjusting prices, 169 

plan of organization, 169 
Dairymen's League, 107 

elections, 172 

growth, 144 

incorporation, 172 

incorporated on capital stock 
plan, 157 

influence on prices, 219 

membership, 51, 144 

ofl&cial organ, 173 

organization, 143 

plan of organization, 172 

revenue, 172 
Dairymen's League Cooperative 
Association, 159 

incorporation, 174 

plan of organization, 174 

financing, 175 
Dairymen's League News, 173 
Death rate, decrease of in New 

York City, 3 1 
Decency in milk production, 22 
Delivery, cost of, 124 

difficult to ascertain, 129 

in Detroit, 128 

night delivery, 92 

problem, 87 
Delivery-men, keeping check on, 

83 
payment of, 91 
Demand fluctuates, 102-104 
Detroit, cost of distribution in, 127 



Detroit, milk prices, 213, 295, 310 

Diet, milk in, 45 

Differential to allow for fat 

content, 278-9 
Direct marketing, 73 

equipment for, 74 

methods of handling milk, 74 

problems of, 75 

declining, 75 

not desirable at present, 'jd 
Distribution, cost of, 117, 125-127 

direct and indirect, 71 

direct, 73 

store cannot take over, 98 
Distributor, honest, 32 

penalized, 32 
Duplication of distributive ser- 
vice, 72, 93 
Duplication of inspection, 27 

Electric roads, use of for milk 

handling, 63 
Erie County Milk Association, 

I8S 
Essex County, N. J., 27 
Expansion of milk zones, 52 
Export markets for milk, 59 
Exports of milk, 6o-6i 

Farmers, attitude towards milk 
regulation, 18-19 
change in attitude, 19 
more important than the 

dairy, 20 
collection of milk from, 62 
Fat content, standardization of, 

41 
Fat standards, 34-35 
Federal regulation of milk, 28 



INDEX OF SUBJECTS 



Z^l 



Federation, National Milk Pro- 
ducers, 164 

Financial relations between pro- 
ducers and dealers, 78 

Five States Milk Producers' As- 
sociation, 140-142 

Food inspection decisions, 33 

Foods, relative wholesale and 
retail prices of, 241 

Foreign demand, influence on 
prices, 225 

Formula method of price deter- 
mination, 200-205 
Warren Formula, 205 

Freight zones, 69 

Geneva Experiment Station, 21 

Grades and standards, 32-35 
basis for grades, 35 

Grades of milk in New York, 38 

Grades recommended by Com- 
mittee on Milk Standards, 39 

Grading implies labeling, 42 

Grading of milk, 34 
cost no obstacle to, 41 

Granger movement, 136 

Historical sketch, of milk prob- 
lem, 1-3 
of milk regulation, 16 

Ice cream factory not a stable 
market for whole milk, 59 

Ice cream, milk used in manu- 
facture of, 5 

Imperial Valley Milk Producers' 
Association, 159 

Indirect marketing, 64 
extent of, 77 



Indirect marketing, in city 
plants, 82 

processes complex, 82 
steps involved, 81-82 
systematization necessary in, 
81 

Infants, milk for, 35 

Infant mortality, New York 
City, 31 

Inland Empire Dairymen's Asso- 
ciation, 157 

Inspection, New York, 26 
city versus state, 26-27, 35 
city carries burden of, 27 
duplication of, 27 
extent of in United States, 

28-30 
in Wisconsin, 28 
results of in Ithaca, New 
York, 131 

Interstate Milk Producers' Asso- 
ciation, 149, 157 

Ithaca, New York, results of 
inspection in, 3 1 

Kansas City Milk Survey, 131-132 
Kelton dairies, experiments on, 

201 
King, Clyde L., 98-100 

Leased car, 69 

Legal standards, necessary, 32 

list of for various states, 34 

state and city compared, 35 
Lexington, Kentucky, regulation 

through publicity, 25 
"Liquidated damage" clause, 162, 

178, 286 
Load, size of, 90 



328 



INDEX OF SUBJECTS 



"Loose milk," 72, loi 
Losses in farms and factories, 5 
Losses in retailing milk through 
stores, loi 

Margins, dealers,' in Columbus, 
Ohio, 125 

in ten cities, 229 

in various cities, 121 

received by stores, 99 

vary, 120 
Marginal producers, 193 
Marion, Ohio, milk prices, 301 
Markets, alternative for milk, 

53-55 

Massachusetts, cost of distribu- 
tion in, 126 

Meat, compared with milk, 14 

Middleman function, 70 

Milk, age when delivered, 1 1 
as a market commodity, 13 
basis of payment for, 42 
cans, ownership of, 79 
certified, 36 

collection of, from farmers, 62 
compared with other foods, 

14715 
distribution affected with a 

public interest, 13 
in the diet, 7, 45 
origin of certified, 36-37 
raw defined, 39 
regularity of use, 97-98 
where produced for city use, 
106 
Milk boycott, 139 

Chicago, 153, 160-161 
Milk business a public utility, 
242 



Milk commission to control price, 

259-261 
as a solution for milk problems, 

261 
first, 36 

membership of, 260 
number of, 37 
Minneapolis Milk Commission, 

38 

Milk Commission for Ohio, 48 

success of in Detroit, 260 
Milk Commissions, American As- 
sociation of, 37. 

described, 37 

Medical, 35-38 
Milk consumption, in towns and 
cities, 6 

on farm, 6 

per capita, 8 
Milk Exchange, New York, 140 
Milk grades. New York, 271- 

276 
Milk price arbitrator, 261-263 
Milk price commissions, 104 

New England, 1 1 1 
Milk prices, 48, 49, 56, 188-241. 

Marion, Ohio, 301 

Minerva, 223, 301 

for various uses, 137 
Milk problem, historical sketch 

of, 1-3 
Milk producers' associations, de- 
velopment of, 156 

list of, 182 

sources of revenue of, 162 

types of, 157 
Milk Producers' Association, of 
Central California, 158 

Chicago, 153 



INDEX OF SUBJECTS 



329 



Milk Producers' Association, of 
Western Pennsylvania and 
Eastern Ohio, 151 
Milk Producers' Cooperative 
Marketing Company (Chi- 
cago), 107, 154, 157, 158 
contract, 162 
Milk Producers' Union (Cleve- 

and), 150 
Milk production, cannot be 

halted, 137 
Milk Shippers' Union (Chicago), 

152 
Milk Standards, Committee on, 

38 
Milk "strike," 139 

Chicago, 153 
Milk supply, and death rate, 3 1 

available, 46 

composition of, 34 ^ 

control of and public safety, 3 1 

composition of, 34 

homogenized, 33 

improvement of, 3 1 

pasteurized, defined, 33, 39 

standards in city and state 
compared, 35 

standards in various states, 34 

skim, defined, 33 

utilization of, 4-5 

whole, defined, 33 
Milk zones, 2, 24 

about larger cities, 69 
p- Cleveland, 48 

Detroit, 47 

expansion of, 52 

Milwaukee, 46 

New York, 48, 49 

Pittsburgh, 48 



Milwaukee, Milk Commission, 37 
Milwaukee, milk consumption 

»n» 45 
source of milk supply, 45 
milk prices, 213, 236, 240, 288, 

289, 305 
Milk Producers' Association, 

157 
tubercuHn test ordinance, 26 
Minerva milk prices, 223, 301 
Monopoly, dissatisfaction with 
in Calgary, Canada, 257 
fear of, 256 
plan for, 252-255 
recommended for New York 

City, 252 
recommended for Rochester, 

New York, 252. 
regulated, 251 
Motor truck, used for collection 

of milk, 62 
delivery at wholesale, 87 
for retail delivery, 87-89 
Municipal distribution of milk, 

243 
arguments for, 245-246 
arguments against, 250-251 
financing, 246 
compared with municipal 

light, 250 
control, 247 

estimated expense of, 248 
for Jamestown, 249 
for New York, 249 
plan proposed for Winnipeg, 

Canada, 247 
where proposed, footnote, 243 
Municipal Reference Bureau, 
University of Wisconsin, 28 



33° 



INDEX OF SUBJECTS 



National Milk Producers' Feder- 
ation, 164 
New England Milk Producers' 
Association, 146-147, 156, 

IS7» 158 
incorporation, 165 
oflBcial organ, 166 
plan of organization, 165 
rotating financing plan, 166 
Turner Center System, 166 
New England Regional Milk 

Commission, i ii 
New England Surplus plan, 1 10 
New Orleans milk prices, 212, 

216, 290, 307 
New York, early milk producers' 
organizations in, 138 
carries burden of milk inspec- 
tion, 27 
Milk Exchange, 140 
milk inspection, 26 
milk prices, 212, 216, 240, 293- 

294; 296, 311 
score card, 20 
surplus plan proposed in, 112- 

New York City, largest milk 

market, 50 
Night delivery, 92 
North, Dr. C. E., 38 
Northeastern Ohio Milk Pro- 
ducers' Association, 151 
Northern California Milk Pro- 
ducers, 158, 178 
plan of organization, 178 
method of contracting, 179 
voting, 179 

withdrawal of members from, 
180 



Northern Ohio Milk Producers* 
Association, 150 

Ohio Farmers' Cooperative Milk 

Company, 150 
Outlets, alternative, for milk, 

53-55 

Pasteurization, adoption of, 22-23 
Pasteurized milk defined, 33, 39 

graded, 38 
Payment for milk, basis of, 42-43 
on fat basis, 44 

making directly to association, 

163 

People's Pure Milk Company, 143 

Per capita consumption of milk, 8 

Philadelphia, milk prices, 212, 

216, 240, 292, 309 

much milk retailed from wagons, 

230 
Milk Shippers' Union, 148 
surplus plan, 109 
"United Association" formed, 
147-148 
Pittsburgh, milk producers or- 
ganize, 150 
much milk retailed from 
wagons, 230 
"Point," meaning, 278 
Portland, Oregon, milk prices, 

219, 298 
Price, 48, 56 

adjustment to fat value, 279 
"all commodities," 302 
basis of milk prices, 42-44 
butter and cheese basis of, 

207-210 
butterfat basis, 212 



INDEX OF SUBJECTS 



331 



Price, cheese as a basis for, 206 
conclusions relative to, 268 
cost of production as a basis, 

198 
price and demand, 188 
determination of, 160, 192, 194 
determination of by dealer, 196 
formula method of determin- 
ing, 200-206 
for different uses, 137 
foreign demand, 225 
prices by geographic sections, 

224 
price policy and the retail 

store, 100 
to producers in various cities, 

212-219, 287-302 
regulation, 99 
relation of cost of production 

and price, 191 
relative prices, 241 313, 
retail various cities, 302, 315 
relative in United States, 312 
store responsible for increase 
in, 101-102; and supply, 190 
Warren Formula, 205 
value of formula method, 206 
Profit, reasonable, 191, 194 
Public interest, milk business 

affected with, 13, 266 
Public safety and milk supply, 31 
Public utility, milk business a, 242 
Publicity in milk regulation, 24 

Quality, competition reduces, 32 
better than formerly, 130 

Railroads as milk carriers, 68 
Rail shipments, first into New 
York, 2 



Regularity, of use of milk, lo-ii 

of production, 10 
Regulation, by whom, 26 

early instances, 16 

Chicago, 26 

city versus state, 26 

farmers' attitude towards, 18 

federal, 28 

methods of, 24 

points coming under control, 
30 

hampers production and dis- 
tribution, 3 1 

publicity a factor in, 24 

in Lexington, Kentucky, 25 

in Milwaukee, 26 

regulation and milk shortage, 
26 

tuberculin, 26 

results in Ithaca, New York, 31 

Springfield, Ohio, 27 
Remedies proposed, 242-243 
Retail prices, ten cities, 303 

various cities, 303-315 
Revenue of milk producers' asso- 
ciations, 162 
Rochester milk survey, 125, 128; 

130-131 
Rotating financing plan, 166 

San Francisco milk prices, 212, 
213, 219, 289 

San Joaquin Valley Milk Pro- 
ducers' Association, 158 

Score card used by milk commis- 
sion, 37 
for grade A milk, 39 

"Seller's marker," 46 

Shopkeepers, 2, 72 



332 



INDEX OF SUBJECTS 



Shortage, milk, and regulation, 
26 
in Columbus, Ohio, 26 
cost of meeting, 11 5-1 16 
Small dealer, 84 
Solids not fat, 29 
"Special" milk, 75 
"Spread" confused with "cost," 

118 
Spreads in various cities, 121 
Springfield, milk prices, 212, 213, 
216, 298 
milk regulations, 27 
Standardization of fat con- 
tent, 41 
facilitates grading, 41 
advantages of, 41 
Standards, consumer cannot rec- 
ognize certain deficiencies in, 

32 
government standards usually 

minimum standards, 32 
list of in various states, 34 
State versus city milk control, 

257 
Store, as a factor in milk distri- 
bution, 95 

as a remedy, 262 

cannot take over entire dis- 
tribution of milk, 98 

has necessary functions, 97 

services of, 96 

store and retail price policy, 
100 

number of in Columbus, 97 

margins received, 99-100 

responsible for increased milk 
prices, 101-102 

sale of milk through, 72 



Straining does not make clean 

milk, 22 
"Strikes," early, 137 

use of, 160-161 
Supply and demand fluctuate, 

102-104 
Surplus, 104 

cost of caring for, 115-116 

cooperative manufacture of, 
107-109 

and advertising, 107 

health ordinances and, 104 

nature of, 103-106 

relation to cost of produc- 
tion, 107 

utilization, 105 
Surplus plan, Philadelphia, 
109 

Boston, 1903, 146 

Akron, Ohio, 111-112 

objections to, 116 

proposed for New York, 112- 

"5 
Surplus problem and cooperative 
country plants, 158, 267 

Tickets, single service, required, 
29 

Ticket system, 91 

Toledo, milk prices, 212, 216, 
223, 297 

Towns, milk consumption in, 6 

Trade Union Act, 135 

Transportation of milk by rail- 
way, 68 

Trucks, used for collection of 
milk, 62 

Tuberculosis, test required, 29 

Turner Center System, 166 



INDEX OF SUBJECTS 



333 



Turnover, daily, with milk, loi 
Twin City Milk Producers' Asso- 
ciation, 107, 157-158 

United Dairy Association (Wash- 
ington State), 156, 157, 159 

United Milk Producers' Asso- 
ciation (Baltimore), 149 

United States Department of 
Agriculture, 29 
Dairy Division, 29 
score card, 21 

Utilization of United States milk 
supply, 4 

Vested rights, 53 



Waste of milk, 5 

Weather, supply and demand 
affected by, 102 

Wholesale prices of "all commod- 
ities" index, 302 

Wholesale prices of milk, 212-219, 
287-302 

Wicks Committee, 261 

Winnipeg, Municipal milk distri- 
bution proposed, 247 

Zones, milk, about cities, 2 
Zoning, to eliminate duplica- 
tion, 262 

legal difficulties of, 263 

in Philadelphia, 263 



